Just spoke with two searchers going through the SBA 7a bank process... is it common knowledge that the PG related to the equity in your home is a preemptive lien on your home?
It was my understanding that if you became a default risk with an SBA 7a, then they'd move towards a lien on your home. Surprised to learn in the underwriting process they mandate a lien on your home if it's a portion of your net worth.
Person Guarantee Fine Print
by a searcher
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So as you can see, the pledge of a home is not because of your guarantee, but it is because of the collateral test. If you do have sufficient outside collateral meeting the SBA guidelines, then there should not be a need to put a mortgage on your home. However, some lenders may still require it to further strengthen the loan. In that case it is an individual lender decision and not a requirement of the SBA. Also, typically if you do not have 10% to 15% or more equity in the home, the lenders will not bother taking it as additional collateral. The SBA does not require the Bank to take it if there is no real equity there. Again, some lenders may still require it to be pledged even if it does not provide much equity support even though the SBA does not require it.
If you would like to discuss the risks and way an SBA personal guarantee works, I would be more than happy to do so at anytime. You can reach me here or directly at --@----.com Thank you and have a great day!