Personal Guarantee with an SBA Loan

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by a searcher from Louisiana State University - E. J. Ourso College of Business
in Houston, TX, USA

2yrs ago

Personal Guarantee with an SBA Loan

If an investor provides more than 20% of the total equity injected into an SBA funded acquisition, does that investor also have to provide a PG? Or does that only apply if the equity provided is greater than 20% of the total enterprise value?

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reply by a lender 2yrs ago
from University of North Carolina at Wilmington in Wilmington, NC, USA

An entity or person will be required to gty a SBA loan if they have over 20% ownership in the business. It's not tied to the % of equity dollar or enterprise value but how much ownership they have in the operating entity. If you give preferred returns you need to be concerned about economic interest of those returns compared to the common ownership given. Happy to chat through this requirement. Reach out at redacted ^redacted‌

reply by a lender 2yrs ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Sarah is correct. One thing I would add is that the amount of equity an investor is bringing to the table does not need to meet their percentage of ownership in the operating entity. Namely, an investor can bring 50% of the equity but only have a 15% ownership interest and they would not be required to sign a personal guarantee. In essence the primary owner taking on the guaranty and operating risk can keep a higher ownership interest with less equity into the transaction. If you have any other questions you can reach me at redacted Good luck.