Finding Investor Guarantors for SBA Loans

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by a searcher from University of Georgia
in Atlanta, GA, USA

2yrs ago

Finding Investor Guarantors for SBA Loans

Has anyone encountered investors who are willing to act as personal guarantors for SBA loans? I’m curious about how often this happens and under what circumstances it might be feasible. I understand there’s a thin line between an investor who doesn’t want to PG and a searchfunder who is new to acquisitions and may not have a qualifying PFS to secure a complete SBA loan.

thanks in advance for the insight.

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reply by an investor 1yr ago
from University of California, Berkeley in San Francisco Bay Area, CA, USA

The SBA can and will go after the guarantor with the most personal assets. As a search investor, I would never sign an SBA PG because the potential returns do not justify the risk of putting up to $5M on the line given the SBA's PG requirements. Ideally, you would want to structure the deal so the person who has the lowest net worth signs the PG. In a downside scenario, the SBA will likely just do an "offer in compromise" and let the guarantor off the hook if there are no significant assets to go after. Also, as an investor, I would expect the person who runs the company to sign the PG.

reply by a searcher 1yr ago
from University of Illinois at Urbana in Chicago, IL, USA

I really don’t see why a search investor would take this type of risk. In the extreme case which the investor believes 100% in the searcher thesis and cannot help finding other investors to jump in, I could see the investor taking great majority of the equity using many types of sources, but definitely not a SBA loan.