Do Equity investors have to provide a personal guarantee on an SBA Loan?

by a searcher from Georgetown University

2 years ago

I have private investors that are interested in helping to fund my acquisition, which is great.  I plan on funding the rest of the acquisition with an SBA loan.  However, I read in the SBA deal terms something about a requirement for anyone who owns more than 20% of the equity to also sign a Personal Guarantee.  My investors are interested in investing... but less excited about the idea of providing a PG on a business that they aren't actively involved in operating.  I know I will have to sign a PG.  Does anyone know for sure if outside investors have to sign one as well?

2 likes
195 views
17 comments

searcher from WHU-Otto Beisheim School of Management

Interesting discussion

2 years ago | like reply | 0 likes

searcher from Georgetown University

Thanks everyone for the helpful response. This community is great. It does seem a little counterintuitive on the SBA's part, as the lower the leverage percentage the lower the risk for them. But understanding this is important. Thanks all!

2 years ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.