One of the scariest parts of going the self-funded acquisition / SBA debt route is the personal guarantee.
~17% is the best SBA loan default rate figure I've found, from study period###-###-#### which obviously includes a bad recession:. Source: https://www.nerdwallet.com/article/small-business/study-1-in-6-sba-small-business-administration-loans-fail (###-###-#### study period).
Does anyone know of a scenario where a PG wiped out a searcher, i.e. losing all retirement / brokerage assets and having primary residence seized? Does this actually happen? What does the path to get there look like and what other remedies are considered by the lender before going this route?
Assuming reasonable due diligence and relatively high leverage deal with
-Purchase price of 3 to 5x-Services/manufacturing business with minimal Capex needs
-Cap structure of 10-20% seller note, 60-80% SBA loan and 10% equity
Any perspectives on the 'realistic' level of risk involved with a PG are welcome.
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