SBA to SBA refinance with no PG

by a searcher

10 months ago

Hello community friends,

Given the new regulations emerging in the SBA 7a landscape, I'm curious if anyone has attempted to refinance an SBA 7a loan with another SBA 7a and taken advantage of the opportunity for no personal guarantee (PG)? I have a partner looking to buy me out but has no collateral. Therefore, if she qualifies for a refinance without a PG, I should theoretically be able to refinance without one as well, right?

Thanks in advance.

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lender from Eastern Illinois University

As a general rule you cannot refinance an SBA 7A loan with another SBA 7A loan. The only way you can do it is if you are getting a substantial cash flow savings by doing so, and not just from extending the amortization but from the interest rate savings. Even if you were to be getting that, all SBA 7A refinances with another SBA 7A loan must go directly to the SBA for approval, and the SBA denies this approval a majority of the time. So I would not count on doing an SBA 7A refinance.

As for no-guarantee on an SBA 7A loan, that is not an option. The SBA loan program still requires all SBA 7A loans to be fully guaranteed by any 20% or greater owners. If there is a collateral shortfall on the loan the SBA still requires any outside assets of the guarantors (usually found in the form of equity in a home) to be pledged as additional collateral on the loan. So it is not possible to do an SBA 7A loan without a personal guarantee.

Now, if the loan is not fully secured and the 20% or greater owners do not have any personal assets to pledge on the loan, the Bank and SBA will still make the loan, But the guarantors will have still sign a personal guarantee on the loan even though they do not have outside assets.

The only new provision in the SBA 7A loan program is that it will now allow someone else to step in and replace the guarantee of another guarantor. However, I have yet to see this happen. Typically if someone is already guaranteeing the loan, they cannot count as a replacement guarantor for another guarantor. So it would have to be someone else not required to guarantee the loan. I have yet to see a situation where someone not required to guarantee an SBA loan is going to step up and guarantee the loan for someone else who owns 20% or more of the business when the guarantor does not. I am not sure how often if ever this new provision from the SBA will be used.

Please let me know if you have any additional questions.

10 months ago | like reply | 0 likes

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