The same-NAICS expansion carve-out - the roll-up operator's best-kept fact
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Quick Answer
An existing business acquiring another in the same 6-digit NAICS code, under identical ownership and in the same geographic area, is treated as an expansion with no minimum equity injection.1
What it is
Where an operating business acquires a business sharing its own six-digit NAICS code, with identical ownership, in the same geographic area, and the parties are co-borrowers, the SOP treats the transaction as an expansion rather than as a change of ownership — and no minimum equity injection applies.1
Operational context
What good looks like
Why It Matters
For anyone building a platform by buying more of what they already own, this is the most consequential financing fact available and it is buried in a Word document almost nobody opens. It changes the cash required per add-on, which changes how many add-ons a year is possible, which changes the strategy. Confirm each condition with your lender in writing before you rely on it.1
Common mistakes
Term Family
Related concepts
Frequently Asked Questions
What is The same-NAICS expansion carve-out - the roll-up operator's best-kept fact in venture capital?
Where an operating business acquires a business sharing its own six-digit NAICS code, with identical ownership, in the same geographic area, and the parties are co-borrowers, the SOP treats the transaction as an expansion rather than as a change of ownership — and no minimum equity injection...
Why is The same-NAICS expansion carve-out - the roll-up operator's best-kept fact important for startups?
Understanding The same-NAICS expansion carve-out - the roll-up operator's best-kept fact is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.A1-06 — SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)Gov / statistical primary(An existing business acquiring another in the same 6-digit NAICS code, under identical ownership and in the same geographic area, is treated as an expansion with no minimum equity injection.)primary · A1 · operating-compliance · rule
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