Personal Guarantee with an SBA Loan

by a searcher from Louisiana State University - E. J. Ourso College of Business

1 year ago

If an investor provides more than 20% of the total equity injected into an SBA funded acquisition, does that investor also have to provide a PG? Or does that only apply if the equity provided is greater than 20% of the total enterprise value?

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3 comments

searcher from Georgia State University - J. Mack Robinson College of Business

This is helpful, thanks.

10 months ago | like reply | 0 likes

lender from Eastern Illinois University

Sarah is correct. One thing I would add is that the amount of equity an investor is bringing to the table does not need to meet their percentage of ownership in the operating entity. Namely, an investor can bring 50% of the equity but only have a 15% ownership interest and they would not be required to sign a personal guarantee. In essence the primary owner taking on the guaranty and operating risk can keep a higher ownership interest with less equity into the transaction. If you have any other questions you can reach me at --@----.com Good luck.

1 year ago | like reply | 1 like

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