Complete Connect – Personal Guaranty Requirements

Complete Connect – Personal Guaranty Requirements

Personal Guaranty Requirements

By Karen McHugh

SBA requires that all 20% or more owners of the applicant business fully guarantee the SBA loan. Other guaranties may also be required if they are necessary to allow perfection of liens on collateral required to appropriately secure the loan (e.g., community property or spousal interests), or to provide additional collateral to bolster a weak credit.

All entities that own 20% or more of the applicant company must provide an unlimited full guaranty. If the entity that owns 20% or more of the company is a trust (revocable or irrevocable), the trust must guarantee the loan with the trustee executing the guaranty on behalf of the trust and providing the certifications required. If the trust is revocable, the Trustor also must guarantee the loan.

At least one individual or entity must guarantee each loan. If no one owns 20% or more of the applicant business, at least one of the owners must provide a full unconditional guaranty.

Any person subject to the personal guaranty requirements 6 months prior to the SBA application date would continue to be subject to the requirements even if that person has changed his or her ownership interest to less than 20%. The only exception is when that person completely divests their interest prior to the application date.

When an ESOP or 401(k) owns 20% or more of the applicant company, the Plan or Account cannot guarantee the loan. The Plan or Account must meet all applicable IRS eligibility requirements. In addition, certain loan conditions must be met:
• The owner of the 401(k) must provide his or her full unconditional personal guaranty (regardless of ownership %).
• The members of the ESOP are not required to personally guarantee the debt, but all owners of the applicant company who owned an ownership interest of 20% or more outside the ESOP must guarantee the SBA loan.

The lender must obtain a personal financial statement from all individuals guaranteeing the loan. If the guarantor is a business entity, business financial statements are necessary to determine the assets available to support the guaranty.

When underwriting a SBA credit or qualifying a borrower for SBA financing, it is important to understand SBA documentation requirements. We want to be your “go to” team for whatever needs you may have in the SBA lending world (consulting and/or outsourcing processes). To learn more about the all-inclusive SBA lending services of SBA Complete, go to or call us at 800-801-2378.