Swapping PG and Collateral on sba loan after one year

February 20, 2024

by a searcher in Illinois, USA

With latest changes on sba 7a loan, curious if SBA is allowing to swap PG and collateral with another partner ? How does that happen and what conditions needs to be true in order it to happen ?
Is it at the discretion of lender ? What objections lender may hv ?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

The only new thing now is the fact you can have someone else not required to guarantee the loan replace your personal guarantee. But this rule is really in place to cover deals in advance of closing. Once a deal is closed you could always try to get a guaranteed removed or collateral released, but you would typically need another existing guarantor who could cover that and your ownership would need to be removed from the deal to make that happy. I will tell you that in general I have found guarantors who want to exit a deal after a year have found it very difficult if not impossible to get the Bank to let them out of the guarantee or their outside collateral unless the other guarantors can cover that collateral shortfall. It is also fully up to the discretion of the lender whether they want to make a change. So unless you have covered this up front on a transaction with your lender and they have provided you an upfront willingness that they will do this, I would not trust that it will happen post closing.

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