When it comes to obtaining an SBA loan, there are certain requirements that must be met. Most lenders require a personal guarantee from anyone who owns more than 20% of the business. This means that if the business fails to repay the loan, the owners are personally responsible for the remaining amount. Additionally, lenders may request limited or unlimited personal guarantees from other business owners.
In addition to a personal guarantee, lenders may also ask for collateral to secure the loan. This could include valuable personal assets such as a home or inventory of the business. It is important to note that certain types of companies are not eligible for SBA loans or SBA loan guarantees. If two conventional lenders have declined your loan application, you may need to rework your business plans.
The SBA loan program is designed to help for-profit businesses that cannot obtain other forms of funding. It is possible to combine SBA loans with other forms of financing such as 401(k) business finance or unsecured loans. The most important factor for the SBA is whether the loan is secured with the maximum capacity of the individual business owner. The lender does not have to garnish the security or request payment from any other source before going directly to the loan applicant for repayment of the loan.
