Does the SBA Require a Guarantee?
The Small Business Administration (SBA) requires at least one personal guarantor and a personal guarantee from all owners of 20% or more of the borrowing entity.
Can a borrower obtain a loan without sufficient business collateral?
The SBA loan amount is determined by borrower’s needs and the ability to repay the loan. The SBA will take all available business collateral. If all available collateral is insufficient to secure the loan on a liquidated basis, the borrower may still be able to obtain the loan.
If there is not enough business collateral to secure the loan on a liquidated basis, the borrower will need to provide a secured personal guarantee. This means they will need to pledge personal real estate such as a home, but only to the extent that they are short on business collateral.
What are the terms?
Up to 25 years for an SBA loan secured by real estate, 10 years on everything else.
Is there a maximum interest rate that can be charged?
The SBA caps the interest rate a bank can charge at the WSJ Prime Rate + 2.75%, if the loan is a variable rate loan. On a variable rate loan pricing can adjust monthly, quarterly, annually, or every 3 years or every 5 years. This is determined by the lending institution’s requirements.