SBA 7(a) Collateral & Separate Property

by a searcher from The University of Michigan - Stephen M. Ross School of Business

1 year ago

NOT LOOKING FOR COMMENTARY ON MARRIAGE/RELATIONSHIP AND HOW WE CHOOSE TO SPLIT THINGS - THANK YOU!

Is 100% of the real estate required as SBA 7(a) collateral if the collateral shortfall is greater than the equity in the primary residence?

I am married and signed a prenup. Through that agreement, my spouse and I each SEPARATELY own 50% of our primary residence and split the related mortgage. I received mixed messaging on whether my spouse's 50% (not marital property; spouse owns real estate separately) is required as collateral for an SBA 7(a) Loan. I alone have less than 25% equity in the primary residence.

If someone has a specific clause for me to look into, that would be very helpful. Thanks in advance!

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searcher from The University of Michigan - Stephen M. Ross School of Business

Thanks Mike and JP!

1 year ago | like reply | 0 likes

lender from Sam Houston State University - College of Business Administration

The SBA looks at spouses as one unit, even with the prenup agreement. If there is overall 25% equity in the property, it would need to be pledged and your wife would have to provide a limited guarantee, limited to her interest in the property. You will also have to provide a joint personal financial statement. I had a customer with a separation agreement with his spouse for over 20 years and the SBA said we still needed a joint PFS. If you have not identified a target yet, go get a HELOC so there is not sufficient equity to take a second lien.

1 year ago | like reply | 2 likes

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