Clarification on new 7a rules (June 2025)

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by a searcher from Washington University in St. Louis
in Austin, TX, USA

1yr ago

Clarification on new 7a rules (June 2025)

A broker was explaining to me yesterday that the changes will require deals with any form of seller financing to be collateralized by the seller? Can anyone clarify and/or confirm I understood this correctly? How is this different from the current rules in place?

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reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I think I may know where the confusion is coming from. First, seller notes do not require the seller to sign a personal guarantee or pledge personal collateral to the Bank, even if those seller notes exceed 20% of the purchase price. However, if the seller retains over 20% equity in the business, they would need to sign a full personal guarantee for the life of the loan, and with that personal guarantee the pledge of personal assets is required if the loan is not fully guaranteed by outside collateral just like it would be for any other guarantor that owns 20% or more of the business. If the seller retains under 20% of the business, based on my read of the new SBA Standard Operating Procedure, they would not be required to pledge outside assets to secure the loan as Guarantors that own under 20% are not required to pledge such assets. I hope this helps to clarify. Please let me know if you would like to discuss further. You can reach me here or directly at redacted

reply by a searcher 1yr ago
from University of Kentucky in Lexington, KY, USA

I interpret this new rule set as others who have expressed thoughts on the matter. If it is just a seller note and is not tied to the equity injection in any way, shape, or form, then it doesn't require anything of the seller. If it is tied to the equity injection piece, it would be subject to standby for the life of the loan, but only the percentage of the note that is being used as equity. The remainder would be a separate note and subordinated to the SBA loan.