SBA personal guarantees: questions and answers

All 15 answers on SBA personal guarantees

Each entry gives the short answer. Open it for the full explanation and its sources.

Who has to personally guarantee an SBA loan?

Every individual who owns 20% or more of the applicant, directly or indirectly, must give an unlimited full guaranty. If no one does, at least one owner must provide a full unconditional guaranty. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A; 13 CFR § 120.160(a).

Can a lender require a guarantee from a minority owner?

Yes. SBA or a delegated lender may require full or limited guaranties from anyone, whatever their ownership, when needed for credit or other reasons. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.1.c; 13 CFR § 120.160(a).

Does my spouse have to guarantee my SBA loan?

SBA requires it if your spouse owns part of the business and both spouses and minor children together hold 20% or more. A spouse who owns nothing signs collateral documents instead. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.2.

What does a non-owner spouse sign for an SBA loan?

The appropriate collateral documents. Any guaranty secured by jointly held collateral is limited to the spouse's interest in it. The SOP does not require a non-owner spouse to sign the personal financial statement, but SBA Form 413 can. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.2.b.

Does a trust that owns my business guarantee the SBA loan?

Yes, when trusts together own 20% or more of the applicant. Each trust gives an unlimited full guaranty, and the trustor must also personally guarantee. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.3; SBA Information Notice 5000-882227.

Does owning through a holding company avoid the SBA guarantee?

No. The test counts direct and indirect ownership. An individual whose stake through any entity reaches 20% or more guarantees personally, and the entity guarantees too if it holds that much. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Paras. A.1 and A.3.

Can I reduce my ownership to avoid the SBA personal guarantee?

Not by trimming your stake within 6 months before applying. You stay subject to the guaranty rule unless you divest completely and cut all ties with the business for the life of the loan. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.4.

What does an unlimited personal guarantee on an SBA loan mean?

You are liable for all amounts owing under the note, not just your ownership share, until it is paid in full. The lender need not collect from anyone else first. Source: SBA Form 148, paras. 1 and 9.D.

What is an SBA limited guarantee on Form 148L?

A guarantee capped by one of seven options, such as a dollar maximum, a percentage or a time limit. Owners of 20% or more give an unlimited guaranty instead. Source: SBA Form 148L, para. 4; SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.1.

Does the SBA guarantee protect me if my business cannot repay?

No. The SBA guaranty protects the lender. If SBA pays the lender, your liability continues, and SBA is not a co-guarantor with you. Source: SBA Form 148, para. 9.B.

Do SBA Express loans require a personal guarantee?

Yes. The core guaranty rules apply to SBA Express. Each owner of 20% or more gives an unlimited full guaranty, even when the loan needs no collateral. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A; Sec. B, Ch. 2, Para. C.2.b.

Does a co-borrower on an SBA note also sign a guarantee?

No. A person who signs the note as a borrower in an individual capacity does not also have to execute a personal guaranty. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.1.a.

Can a green card holder guarantee an SBA loan?

Not as an SBA-required guarantor. Those must be U.S. citizens or nationals. A lawful permanent resident may give a limited or supplemental guaranty in certain cases. Source: SOP 50 10 8.1, Sec. A, Ch. 1, Para. F; SBA Information Notice 5000-877673, Question 1.

Who guarantees an SBA loan when an affiliate owns the building?

Each holder of at least 20% of either the Eligible Passive Company or the Operating Company must guarantee. The Operating Company must be a guarantor or co-borrower. Source: SOP 50 10 8.1, Sec. A, Ch. 2, Para. A.1; 13 CFR § 120.111(a).

Does an SBA personal guarantee end when the guarantor dies?

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.