What does an unlimited personal guarantee on an SBA loan mean?
Short answer
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.
It means you are personally liable for all amounts owing under the note, not just your share of the business. SBA Form 148, the Unconditional Guarantee, sets the terms. On 7(a) loans, lenders may use Form 148 or their own equivalent form (SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.4).
What the form says
- Scope. You guarantee payment of all amounts owing under the note (para. 1).
- Duration. The guarantee stays in effect until the note is paid in full (para. 1).
- Order of collection. The lender is not required to seek payment from any other source before demanding payment from you (para. 1).
- Several guarantors. All signers are jointly and severally liable (para. 9.D). A 30% owner can be asked for the whole balance.
- Costs. You promise to pay the expenses of enforcing the guarantee, including attorney's fees (para. 9.A).
What you give up
You waive rights such as notice of default. You also waive defenses based on claims that the lender improperly valued or impaired collateralProperty a lender can take and sell if a loan is not repaid. (para. 6). Read paragraph 6 closely before signing.
Lender changes to the loan
The lender may modify loan terms without your consent, except to increase the amounts due (para. 4). If it raises the amount without your consent, you are not liable for the increase (para. 6.C.14).
An owner of 20% or more gives this kind of guaranty (Sec. A, Ch. 5, Para. A.1). Have your own attorney review the document you actually sign, since lender forms can differ.
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