Let's say two people are investing in a business and using an SBA loan. I understand there is a requirement that equity owners with more than 20% must give a personal guarantee.
Is there anyway to have it so that one equity investor can elect to take the entire personal guarantee themselves and absolve another shareholder that has more than 20% of equity of their personal guarantee?
Can this be written into the SBA docs or is there some side agreement that is enforceable in bankruptcy?
Offload Personal Guarantee
by a searcher from Cornell University
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Have you run the process to see whether it might qualify for a bank’s more conventional financing, in which case perhaps more ability to release one of the guarantees. Usually entails a higher equity injection, but could be worth pursuing.
PGs just come with the territory. Credit Cards, LOCs, SBA, conventional, almost everything you will need to operate. Operators should be prepared for not just the PG at acquisition, but continual ongoing needs.
However, a good shareholders agreement with strong minority rights may be the answer to some of your needs.