Loans available WITHOUT a Personal Guarantee?

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May 26, 2023

by a searcher from Columbia University - Columbia Business School in Los Angeles, CA, USA

One of our advisors said it was possible to find loans from banks without needing a PG (I.e. not a SBA loan)

Has anyone successfully secured one of these loans? If so, what type of bank provides them and what were the particulars of your deal that allowed you to secure it?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
We are a Commercial Loan Brokerage Shop with over 500 funding partners. We do everything from conventional bank lending to SBA lending and work with a wide variety of lending sources. And I personally have been in the industry for over 25 years. To be quite frank with you, there are very few lending options in the small to lower middle market lending world (the area most searches play in) where personal recourse is not going to be required from at least the principals if not all owners with a greater than 20% ownership interest. It is standard policy for most banks, certainly for the SBA, and even most private lenders.

Typically the only time we see non-recourse as an option is if you have a loan to value / loan to cost that is really low, typically below 50%. Also, if the cash flow is very strong and the debt service coverage ratio is strong, typically north of 1.50x or even north of 2.00x over several years. Lastly, typically they want to see a balance sheet with a strong equity position and relatively low leverage. If you do not meet these conditions, non-recourse is almost impossible to get. Even if you do meet these conditions but there is no hard collateral, like when financing primarily goodwill, lenders still may require some guarantee. We can sometimes get limited recourse done on transactions that are stronger and with multiple owners, but no-recourse is very rare.

One thing to keep in-mind, even in the larger investing banking market many lenders might not require personal guarantees, but many do require corporate guarantees from the private equity firms backing the deals, or they may require bad-boy guarantees for key management (meaning the manager is on the hook if they do something illegal or unethical). I hope this helps to put things in perspective. I am happy to discuss further at any time at redacted
commentor profile
Reply by a searcher
from University of Minnesota in Marysville, WA, USA
Hey Rachel! I was just speaking with a lender who requires no personal guarantee. I haven't worked with them personally, but their program seems really solid. If you're looking for a loan of at least $5M (their current minimum), I'm happy to make an introduction and you can see if they'd be a good fit for you! Feel free to message me here or email me at redacted
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