SBA SOP 50 10 8, A.Ch5.A — GUARANTIES

SOP 50 10 8 A.Ch5.A

Effective 2025-06-01 · publisher's stamp for this provision

A. GUARANTIES 13 CFR § 120.160(a) Each loan must be guaranteed by at least one individual or entity. If no one individual or entity is a direct and/or indirect owner of 20% or more of the Applicant, at least one of the owners must provide a full unconditional guaranty. In addition, if the guaranty will be provided by a trust, the requirements of Paragraph 3, Corporate/Other Guaranties below must be met. 1. Personal Guaranties: Any individual who has direct and/or indirect ownership of 20% or more of an Applicant must provide an unlimited full guaranty. (SBA Form 148 or, for 7(a) loans, equivalent Lender’s form). If a person has executed the Note as a Borrower in an individual capacity, that person does not also have to execute a personal guaranty. When ownership interest of an Applicant is held by a corporation, partnership or other form of legal entity, the ownership interests of all individuals must be disclosed. When deemed necessary for credit or other reasons, SBA or, for a loan processed on a delegated basis, the SBA Lender, may require other appropriate individuals or entities to provide full or limited guaranties of the loan without regard to the percentage of their ownership interests, if any. For example, an individual with a minority ownership or no ownership interest in the Applicant or OC who is critical to the operation of the business may be required to provide a personal guaranty (e.g., Supplemental Guarantors). If a limited guaranty is used, the SBA Lender must choose one of the payment limitation options in SBA Form 148L (Unconditional Limited Guaranty) or, for 7(a) loans, equivalent Lender’s form and specify the option in the E-Tran Terms and Conditions. The SBA Lender must obtain a personal financial statement from all individuals guaranteeing the loan except for Supplemental Guarantors. Guarantors must comply with the requirements in Ch. 1, Para. F, Businesses Owned by Non-U.S. Citizens. 2. Guaranty of Spouse: Each spouse owning less than 20% of an Applicant must personally guarantee the loan in full when the combined ownership interest of both spouses and minor children is 20% or more. For a non-owner spouse, the SBA Lender must require the signature of the spouse on the appropriate collateral documents. The spouse’s guaranty secured by jointly held collateral will be limited to the spouse’s interest in the collateral. Guarantors must comply with the requirements in Ch. 1, Para. F, Businesses Owned by Non-U.S. Citizens. 3. Corporate/Other Guaranties: All entities that have direct and/or indirect ownership of 20% or more of an Applicant must provide an unlimited full guaranty. If the entity that owns 20% or more of the Applicant 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 in Section A, Ch 2, Paragraph B.1.b., Conditions that apply when the EPC is owned in whole or in part by a trust. In addition, if the trust is revocable, the Trustor also must guarantee the loan. The SBA Lender must obtain appropriate financial statements from all entities guaranteeing the loan in order to determine the assets available to support the guaranty. When deemed necessary for credit or other reasons, SBA or, for a loan processed on a delegated basis, the SBA Lender, may require other appropriate entities to provide full or limited guaranties of the loan without regard to the percentage of their ownership interests, if any. This may include entities who manage the day- to-day operations of the Applicant or OC through a Management Agreement without an ownership interest in the Applicant or OC. 4. Reducing Ownership Interest (Six-month lookback rule): Any Person (as defined in 13 CFR 120.10) subject to the guaranty requirements 6 months prior to the date of the loan application would continue to be subject to the requirements even if that Person has changed their ownership interest to less than 20%. See Ch. 1, Para. F, Business Owned by Non-U.S. Citizens, for separate 6-month lookback eligibility requirements for businesses owned by Ineligible Persons. Exceptions to the 6-month lookback rule: i. When that Person completely divests their interest prior to the date of application. Complete divestiture includes divestiture of all ownership interest and severance of any relationship with the Applicant (and any associated Eligible Passive Company) in any capacity, including being an employee (paid or unpaid), for the life of the 7(a) or 504 loan. ii. For 7(a) loans for partial changes of ownership, the percentages of ownership for determining who must provide a guaranty will be based on the post-sale percentage of direct and/or indirect ownership in the business. See the appropriate sections in this SOP on partial changes of ownership for more information.

Source: SBA SOP 50 10 8, A.Ch5.A — GUARANTIES · source URL · snapshot 535743ffe062cc34