Trying to avoid putting a lien on my house for an SBA loan

There seems to be some confusion out here about the percentage. Just to be clear, if you have 25% or more equity (not 20%-20% refers to any guarantor with a 20% or greater ownership in the business - not the amount of equity in the home) and there is deemed to be a collateral shortfall based on SBA underwriting criteria, then you are required by the SBA rules to pledge your home as additional collateral (unless you live in Texas where you are protected by Texas Homestead Laws. That is why we recommend having a home equity to eat up the equity in your home. Even if not drawn, a home equity does count against the available equity in your home. Although the SBA rule states 25% or more, even if you have less equity it is still possible a lender might want to take your home as additional collateral anyway. That is why it is important to note up front you do not plan to pledge your home as additional collateral on the loan. Below is the specific language from the SBA SOP for reference to clear up any confusion.

ii. If there is a collateral shortfall (not “fully secured”) on the SBA-guaranteed loan the Lender: a) Must take available equity in the personal real estate (residential and investment property, including other commercial real estate) of any owners of 20% or more of the Applicant and guarantors except Supplemental Guarantors. Liens on personal real estate may be limited to the amount of the collateral shortfall. In addition, liens on personal real estate may be limited to 150% of the equity in the collateral. b) May include trading assets as necessary (using no more than 10% of current book value for the calculation). iii. SBA does not require a Lender to collateralize a loan with real estate (including commercial, residential and investment properties owned by the Applicant or personally by the owners) to meet the “fully secured” definition when the equity in the real estate is less than 25% of the property’s fair market value. The Lender must document in their loan file the source (other than the personal financial statement) for making the determination of less than 25% equity.

SBA will not put a lien on your primary residence if you have a HELOC at a 75% or greater LTV. This is per the SBA documentation published on their website. Does not mean you have to have the HELOC drawn either. Just means the LOC LTV is 75% or more