Can you avoid the PG (Personal Guarantee) with a SBA Loan?

searcher profile

February 20, 2024

by a searcher from The University of Chicago - Booth School of Business in Greenwich, CT, USA

Hi all,

Anyone knows if is possible to avoid the PG required by the SBA loan under the self-funded search model? See below what I modeled for the self search model, main inputs and assumptions:

- EBITDA 1M, 3.5x

- 80% SBA redacted 5% Seller Note @ 8%, 15% Equity (90% of Equity from Investors @ 15% preferred)

- Equity Split: 20% Inv, 80% Operator

- IRR Investors 35%

- the above looks very attractive for all the stakeholders, the only caveat is the Personal Guarantee required by SBA (which the wife is not comfortable with!)








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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Unfortunately on an SBA loan there is no way to avoid the personal guarantee. Anyone who owns 20% or more of the business is required to sign a personal guarantee. If no individual owns 20% or more of the business, whoever is the primary manager of the business would be required to guarantee the loan. If there is deemed to be a collateral shortfall on the loan based on the SBA lending standards, anyone who is a guarantor could have to pledge personal assets to further secure the loan. If not such assets exist, then none will be required. But if a guarantor has 25% or more equity in their home, then the SBA will require the home to be pledged as additional collateral on the loan. Equity is determined by taking the value of the home minus any existing debts, including both funded and unfunded home equity balances.

The SBA does not require spouses to sign a personal guarantee. However, if the home is being pledged as additional collateral, the SBA does require a partial guarantee just as it relates to the equity in the home from the spouse assuming them have ownership of the home as well.

If you would like to discuss further, I would be more than happy to do so. Please be aware even if you do not go the SBA route, more conventional lenders typically offer less desirable terms from a loan term, cash down, and covenant perspective then SBA loans, and they still often require a personal guarantee as well. You can reach me at any time here or directly at redacted Good luck!
commentor profile
Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
Calin email me for links to attend my weekly session on all things sba. We walk through all the rules and caveats. redacted
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