SBA loan and personal guarantee

September 17, 2020

by a searcher from Columbia University - Columbia Business School in Princeton, NJ, USA

Hi all, I have a target and SBA is an option, but are there any SBA loans without the personal guarantee? How can I structure to avoid the personal guarantee but still be able to borrow against the company's assets? Thanks.

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Reply by a searcher
from Texas A&M University in Dallas, TX, USA

To the best of my understanding the SBA 7(a) loan demands anyone that has at, or more than, 20% equity in the company have signed a personal guarantee. This would potentially include any preferred equity sponsors as well if they desire more of an equity stake. I know this isn't the answer you wanted, but I'm pretty sure this comes with any meaningful SBA loan. If you want to avoid this I think traditional lending may be your best bet. That said, CIBC and Liveoak not requiring personal guarantees for preferred equity sponsors having less than 20% equity in the business is pretty great IMO.

Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA

Try to avoid SBA loans if PG is an issue. You can likely get a non-recourse bank loan if the company has $2M+ in EBITDA and a long history of consistent cash flows or significant assets. Otherwise, you may be able to get a non-recourse loan from an SBIC lender###-###-#### % interest) assuming there is $1M+ in EBITDA with not a lot of variance over the years. I'm not aware of lenders who will do non-recourse loans below $1M EBITDA.

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