SBA Personal Guarantee Requirements: What Owners Need to Know
Updated February 2026 | If you’re applying for an SBA loan, you’ll need to provide a personal guarantee. This requirement applies to all SBA 7(a) and 504 loans—there’s no way around it. Understanding how personal guarantees work helps you prepare for the commitment involved in SBA financing.
This guide covers who must guarantee, what you’re committing to, and common questions about SBA personal guarantee requirements.
What Is a Personal Guarantee?
Definition
A personal guarantee is a legal commitment where you, as an individual, agree to repay the loan if your business cannot. It makes you personally liable for the business debt—your personal assets (home, savings, investments) become available to repay the loan if the business defaults.
Why SBA Requires Personal Guarantees
The SBA requires personal guarantees because:
- Skin in the game: Ensures owners are committed to business success
- Risk mitigation: Provides additional recourse if business fails
- Character assessment: Signals owner’s confidence in the business
- SBA policy: Required by SBA SOP for all 7(a) and 504 loans
No Exceptions
Unlike some conventional loans, SBA loans always require personal guarantees from qualifying owners. You cannot “buy out” of the guarantee requirement with more collateral or higher interest rates.
Who Must Provide a Personal Guarantee?
The 20% Ownership Rule
Per SBA SOP 50 10 8, personal guarantees are required from:
- All individuals owning 20% or more of the borrowing entity
- Any entities owning 20% or more must have their owners guarantee as well
Examples
| Ownership Structure | Who Guarantees |
|---|---|
| John (50%), Mary (50%) | Both John and Mary |
| John (100%) | John only |
| John (80%), Mary (10%), Sam (10%) | John only |
| John (40%), ABC Corp (60%) | John + ABC Corp owners with 20%+ |
| John (30%), Mary (30%), Sam (40%) | All three |
Passive Investors
Even passive investors who own 20% or more must guarantee. There’s no exception for “silent partners” or investors who aren’t involved in daily operations.
Trusts and Estates
If a trust or estate owns 20% or more, the trustee or executor may need to guarantee, depending on trust structure and state law. Consult legal counsel for complex ownership structures.
Unlimited vs. Limited Guarantees
Unlimited Personal Guarantee
SBA loans require unlimited personal guarantees. This means you’re liable for the entire loan amount, regardless of your ownership percentage.
If John owns 30% and Mary owns 70%:
- Both provide unlimited guarantees
- The lender can pursue either for the full amount owed
- John could potentially be held liable for 100% of the debt, even though he owns 30%
Limited Guarantees (Not Available for SBA)
Some conventional loans offer “limited guarantees” where liability is capped at your ownership percentage. SBA loans do not offer this option—all guarantees are unlimited.
Joint and Several Liability
SBA guarantees are typically “joint and several,” meaning:
- Each guarantor is individually liable for the entire debt
- The lender can pursue any guarantor for the full amount
- Guarantors can seek contribution from co-guarantors, but that’s a separate matter
What You’re Actually Guaranteeing
Scope of the Guarantee
Your personal guarantee covers:
- Principal balance: The original loan amount
- Accrued interest: Interest that accumulates
- Fees and costs: Late fees, collection costs, legal fees
- Default remedies: Costs incurred in collection
Duration
The guarantee remains in effect until the loan is fully repaid or the obligation is released by the lender (which rarely happens without full repayment).
What’s at Risk?
In the event of default, your personal assets become available for collection:
- Personal bank accounts
- Investment accounts
- Real estate (primary residence may have some protection depending on state)
- Vehicles
- Other personal property
Bankruptcy Considerations
Personal guarantee obligations generally survive business bankruptcy. If your business files bankruptcy, you remain personally liable unless you also file personal bankruptcy or negotiate a settlement.
Spouse Guarantee Requirements
When Spouses Must Guarantee
Per SBA guidelines, spouses may need to guarantee when:
- Co-ownership: Spouse owns 20% or more of the business
- Community property states: May be required for collateral purposes
- Pledging jointly-owned assets: If home or other assets are pledged
Community Property States
In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), spouses may need to sign the guarantee even if they don’t own part of the business, depending on what assets are pledged.
Protecting Non-Owning Spouses
If your spouse doesn’t own 20% or more and you’re not in a community property state, they typically won’t need to provide a personal guarantee. However, if you default, your share of marital assets could still be at risk.
Personal Guarantee vs. Collateral
Different Concepts
| Personal Guarantee | Collateral |
|---|---|
| Promise to repay personally | Specific assets pledged as security |
| Required for all SBA loans | May or may not be required |
| Puts all personal assets at risk | Limits lender’s claim to specific assets |
| Cannot substitute for collateral | Cannot substitute for guarantee |
Collateral Requirements
SBA collateral requirements vary by loan size:
- $50,000 or less: SBA does not require collateral
- Over $50,000: Lenders follow their standard commercial loan policies
Even if collateral isn’t required, the personal guarantee is still required.
What Happens If You Default?
Collection Process
If your business defaults on an SBA loan:
- Lender attempts collection from business: Seizes business assets, collateral
- Deficiency balance calculated: What remains after liquidating collateral
- SBA pays guaranty to lender: SBA covers its guaranteed portion
- SBA pursues guarantors: SBA or collection agency seeks recovery from personal guarantors
What the SBA Can Do
The SBA has broad collection powers:
- Garnish wages
- Levy bank accounts
- File liens against real property
- Offset tax refunds (federal)
- Report to credit bureaus
Offer in Compromise
In some cases, the SBA may accept an “Offer in Compromise”—settling the debt for less than full amount. This typically requires demonstrating inability to pay and is not guaranteed.
Statute of Limitations
Federal debt (including SBA guarantees) has no statute of limitations for collection. The SBA can pursue the debt indefinitely.
Frequently Asked Questions
Can I avoid the personal guarantee?
No. All SBA loans require personal guarantees from owners with 20% or more ownership. There are no exceptions.
Does my spouse have to guarantee?
Only if your spouse owns 20% or more of the business, or in some community property states when certain assets are pledged.
What if I own less than 20%?
Owners with less than 20% typically do not need to provide a personal guarantee. However, the lender could require it as a condition of approval.
Is my home at risk?
Potentially, yes. Personal guarantees put personal assets at risk. Some states offer homestead exemptions that provide partial protection for primary residences.
What happens to the guarantee if I sell my ownership?
Selling your ownership does not automatically release you from the guarantee. You would need the lender’s consent to be released, which typically requires the new owner to qualify and guarantee.
Can I limit my exposure?
Not with the SBA guarantee itself—it’s unlimited. However, you can explore asset protection strategies (consult an attorney), maintain adequate business insurance, and ensure the business is properly capitalized.
Understanding the Commitment
Personal guarantees are a standard part of SBA financing. While they create personal liability, they also enable access to favorable financing that might not otherwise be available. At GoSBA Loans, we help borrowers understand all aspects of SBA lending, including guarantee requirements.
Get Started: Discuss Your SBA Loan Options
About the Author: Ishan Jetley is the founder of GoSBA Loans, a multi-lender SBA loan marketplace. He helps borrowers understand the full scope of SBA loan commitments.
