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

**Short answer:** 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).

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Last checked: 2026-11-08

Each holder of at least 20% of either company must guarantee, and the operating company must be a guarantor or co-borrower. SBA calls the building owner an Eligible Passive Company (EPC) and the tenant an Operating Company (OC). The rules are in 13 CFR § 120.111(a) and SOP 50 10 8.1, Sec. A, Ch. 2, Para. A.1:

- **The OC.** It must be a guarantor or co-borrower. It must be a co-borrower if it receives proceeds or if proceeds buy assets for its use.
- **Trust owners.** If a holder at that level is a trust, the trustee signs the guaranty for it.
- **Spouses.** A spouse with a smaller stake in either company guarantees in full when both spouses and minor children together hold 20% or more.
- **Non-owner spouses.** They sign the appropriate collateral documents. Any guaranty secured by jointly held collateral is limited to their interest.
- **Others.** SBA or a delegated lender may require more guaranties for credit or other reasons.

A person who signs the note as a borrower in an individual capacity does not also sign a guaranty.

## Collateral from the structure

The EPC must furnish an assignment of all rents paid under the lease as collateral. The lease must be written, subordinate to SBA's lien and run at least as long as the loan (13 CFR § 120.111(a)).

## Structures that cannot use an EPC

employee stock ownership plan (ESOP) and 401(k) plan structures cannot use an EPC and OC. The regulation requires guaranties from each holder of 20%, and those plans cannot give them (Sec. A, Ch. 2, Paras. B and D).

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 2, Para. A.1 (Para. A begins p. 41)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 120.111(a)](https://www.ecfr.gov/current/title-13/section-120.111)
- [SOP 50 10 8.1, Sec. A, Ch. 2, Paras. B and D (pp. 45, 47)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)