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Personal guarantee
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Does the SBA guarantee loans for small business owners?
This is when the SBA can be helpful, as it may guarantee bank loans for small business owners who have inadequate collateral鈥攖he agency, however, may require a personal guarantee instead. 1 2 While SBA guaranteed loans can be a valuable resource, they are not free.
What is an SBA guarantee fee?
When the SBA guarantees a loan, they typically assess a fee known as an SBA guarantee fee. This fee is passed on to the borrower by the lender. Small business owners often find the fees associated with obtaining an SBA loan more attractive than the cost of other capital options.
How long does it take to get an SBA loan guarantee?
To get an SBA guarantee, you have to first meet with an SBA lender. They will review your project and decide if a loan guarantee is necessary. Then there will be quite a bit of paperwork and financial documents to gather in preparation for the loan. This will generally take 2 weeks to 3 months.
What happens if you default on an SBA loan?
What the SBA does provide is a guarantee to the bank that if the business owner defaults, the bank will recover a portion of the money that was borrowed. The guarantee to the bank varies depending on the program but is typically between 50% 鈥?85% of the loan.