Jul 29, 2021
You don’t have to have collateral to get an SBA loan. However, the
SBA will require the applicant to pledge collateral when it is
available to fully secure the loan. If there is not sufficient
collateral in the business, the SBA must take available equity in
the personal real estate (residential and investment property) of
any owners with 20% or more ownership. (An exception is made if
there is less than 25% equity in personal real estate.)
SBA 7(a) Small Loans of $25,000 or less do not require
collateral.
Personal guarantees are also generally required. An individual who
owns 20% or more of the business must provide a full unlimited
personal guarantee. (Sometimes referred to as “guaranty.”) And each
loan must be guaranteed by at least one individual or entity.
Sometimes the SBA may require a personal guarantee from a key
person in the business even if they don’t own 20% or more of the
business. Spouses may be required to sign a personal guarantee when
the combined interest of the two spouses and minor children totals
20% or more. In addition, non-owner spouses will be required to
sign off if jointly held collateral (such as home equity) is
pledged.
Note that startup businesses (businesses in existence for one year
or less) require the small business owner to contribute at least 10
percent of the total project costs. While you may think of this as
a down payment, it is officially called an “equity
injection.
If you'd like to meet with Beau to talk financing, book a
call here
( http://bookwithbeau.com/ )