Thread by @SBA_Matthias

What Is a Personal Guaranty and When Is It Required with an SBA Loan? A 🧵 👇

#sba #smb #acquisitions #entrepreneurs #independentsponsors

1 - When SBA Requires the Personal Guaranty

➡️ Any 20% or more owner of an applicant business is required by SBA to personally guaranty an SBA loan. No exceptions. 1/x

2 - What Does a Personal Guaranty Mean?

➡️ All of your personal assets are along for the ride on your deal. If your deal goes sideways, the bank essentially can go after everything that you own. 2/x

3 - What About My House?

➡️ If you have 25% or more equity in your house at the time of loan application, and if the assets of the business that you're buying don't fully collateralize the loan, the bank is required to take a lien on your house.

4 - What About My House? (*Cont.*)

➡️ If you have less than 25% equity in your house, it comes down to the bank's discretion as to whether or not they want to take a lien on your house. Some banks will require it, and others won't.

5 - House Co-Owned with Spouse (Not In Ownership Group), but More than 25% Equity in House

➡️ In this circumstance, the SBA requires a guaranty from your spouse that it limited to their ownership in the house/residence being pledged as collateral

6 - What Do These Forms Look Like & Are They Negotiable?

➡️ Here is a link to the SBA's Unconditional Guaranty Form (required for any 20% or more owner of the business) 👇

sba.gov/document/sba-f…

7 - What Do These Forms Look Like & Are They Negotiable?

➡️ Here is a link to the SBA's Limited Guaranty Form (required for any spouses co-owning properties when equity is 25% or more) 👇

sba.gov/document/sba-f…

8 - Are Either of These Forms Negotiable?

➡️ In short, the answer is "No." These are standard SBA forms that cannot be modified under any circumstances. Review carefully before signing to ensure that you understand the content.

9 - Do Investors Need to Sign PG's?

➡️ In short - No. SBA only requires a Personal Guaranty from a 20% or more owner of a business. If someone owns less than 20% it falls to lender discretion. In most circumstances, a PG will not be required.

10 - Concluding Thoughts

➡️ SBA requires a PG from anyone that owns 20% or more of a business

➡️ When ownership of someone falls below 20%, SBA does not require a PG, but a bank can still require it to approve the loan

11 - Concluding Thoughts

➡️ If you have any specific questions relating to the SBA PG, please feel welcome to DM me. I will answer them to the best of my ability.

➡️ Folks like @SMB_Attorney are also good resources to reach out to with questions.

12 - Wrap Up

➡️ If you found the content in this thread to be useful, please feel welcome to comment, RT, or share.

➡️ Please also feel welcome to follow me at @PIONEERCAPADV

➡️ I tweet about things relating to SBA, acquisition financing, and other related topics