Does an SBA personal guarantee end when the guarantor dies?
Short answer
Not by its terms. SBA Form 148 stays in effect until the note is paid in full and defines the guarantor to include heirs and successors. How a claim reaches an estate depends on applicable law. Source: SBA Form 148, paras. 1 and 8.
Not by its terms. SBA Form 148, paragraph 1, says the guarantee remains in effect until the note is paid in full. Paragraph 8 says the guarantor includes heirs and successors.
What else the form says
- Guarantors waive any defense that the lender did not make or perfect a claim after a death or disability (para. 6.C.9).
- When SBA holds the note, the guarantee is construed and enforced under federal law (para. 5).
What the form cannot tell you
How a claim reaches an estate, and what heirs actually owe, depends on applicable law and the estate's assets. Ask an estate attorney. The form states the contract, but it does not settle that question.
SBA Form 148L differs. Its successors clause says the guarantor includes successors and does not mention heirs (para. 9). On 7(a) loans, lenders may also use their own guaranty forms (SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.4). Read the document you signed.
Life insurance addresses this risk
On Standard 7(a), CAPLines and certain other loans that are not fully secured, insurance is required in the amount of the shortfall. It applies to principals of sole proprietorships, single member LLCs and businesses dependent on one owner (Sec. A, Ch. 5, Para. C.4). On 7(a) Small and SBA Express loans, the lender's written policy controls.
A required policy is assigned to the lender through a collateralProperty a lender can take and sell if a loan is not repaid. assignment acknowledged by the insurer (Para. C.4).
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