Can a lien on my home be limited to part of the SBA loan?
Short answer
Yes. A required or elected lien on personal real estate may be limited to the collateral shortfall or 150% of the equity in the property. Source: SOP 50 10 8.1, App. 19, Para. A.1, Personal Real Estate.
Yes. SOP 50 10 8.1, App. 19, Para. A.1, Personal Real Estate, says a lien may be limited to the collateralProperty a lender can take and sell if a loan is not repaid. shortfall or 150% of the equity in the property, as applicable. The SOP says "may," so the limit is available but not automatic.
How the two limits work
Suppose your loan has a $60,000 collateral shortfall and your home has $100,000 of equity.
- A lien limited to the shortfall would be $60,000.
- A lien limited to 150% of equity would be $150,000.
Ask which limit your lender applies, and confirm the lien amount before closing. Practices vary by lender.
Business purchases use the same limits
App. 15, Para. C.3.d, says liens on personal real estate may be limited to the amount of the collateral shortfall. It also says they may be limited to 150% of the equity in the collateral.
What the lien limit does not change
A lien limit caps what the recorded lien secures. It does not cap your personal liability. An owner of 20% or more still gives an unlimited full guaranty of the entire loan (Sec. A, Ch. 5, Para. A.1). SBA Form 148 makes a guarantor liable for all amounts owing under the note.
When no lien is required
If equity is less than 25% of fair market value, the lender need not take a lien at all (App. 19, Para. A.1). On 7(a) Small and SBA Express loans outside a business purchase, SBA does not require the lien in the first place (App. 19, Paras. B.2 and B.3).
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
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