What is an SBA limited guarantee on Form 148L?
Short answer
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.
Form 148L is SBA's Unconditional Limited Guarantee. It has the same general terms as Form 148, with a payment limitation added in paragraph 4. The lender picks one option and specifies it in the SBA Terms and Conditions (SOP 50 10 8.1, Sec. A, Ch. 5, Para. A.1.d).
The seven options
- Balance reduction. Liability ends when the total owed falls below a set amount, if the note is not in default.
- Principal reduction. Liability ends when principal falls below a set amount, if the note is not in default.
- Maximum liability. A fixed dollar cap.
- Percentage. A set share of amounts owing when demand is first made, plus that share of later interest and costs.
- Time. The guarantee runs a set number of years from the note date. If the borrower is in default then, it continues until defaults are cured.
- Collateral or recourse. Limited to what the lender obtains from the listed collateral pledged by the guarantor.
- Community property or spousal interest. Limited to that interest in pledged collateral.
Who can use it
SBA's form page says owners under 20% may give a limited or full guaranty (legacy.sba.gov, last updated November 30, 2017). Owners of 20% or more must give an unlimited full guaranty (Para. A.1.a).
A selling owner left with under 20% in a partial sale owes a full guaranty for the full loan amount. It runs at least two years after final disbursement, and the lender may use Form 148L for it (App. 15, Para. A.1.c.ii).
On 7(a) loans, lenders may use their own equivalent form (Para. A.1.d).
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