Illiquid investments - SBA/bank treatment

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February 24, 2025

by a searcher in USA

How do banks/SBA handle illiquid investments when you are taking out a business loan? I've heard taking out a line of credit against your house (HELOC) can protect it in the event of a default. Trying to figure out what is at risk or safe in the event of default. Not planning to default, but also not wanting to bet the whole farm.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be happy to have a conversation and discuss in detail your situation. You can reach me here or directly at redacted

To provide a quick general summary here, technically anything you own is at risk via a personal guarantee. Typically retirement assets are protected from direct liens and protected in bankruptcy. But even if you have a home equity loan and you have equity loan and your home was not required to be pledged as additional collateral on an SBA 7A loan because you had less than 25% equity in the home at time of loan approval, in theory your equity is still at risk under a personal guarantee if there is a default, a collateral shortfall and the Bank decides to pursue you personally for that shortfall. They could get a judgement against you and then put that judgement against your home. I am not saying this to try and scare anyone, but just because individuals need to be aware of what is at risk. Generally speaking the Banks due to pursue guarantors hard unless they know there are assets they can collect on. But it is always a risk. Bankruptcy is also always an option if you the amount still owed well exceeds what assets you have. Again, happy to have a discussion.
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Reply by a professional
from Northwestern University in Chicago, IL, USA
Hi, Let’s connect and talk more! You can email me anytime at redacted
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