Are SBA Loans Personally Guaranteed?

The 20% ownership rule in plain terms

Any person with direct or indirect ownership of 20% or more must provide an unlimited full guaranty, and if no one hits 20%, at least one owner must still guarantee.

The rule comes from SBA's lending procedures, SOP 50 10 8.1, effective October 1, 2026 (checked October 2026). It applies to individuals and to entities. If a holding company, partnership or trust owns 20% or more of the borrower, that entity must also guarantee, and when a trust guarantees, the person who created the trust generally must guarantee as well.

"Indirect" ownership counts. If you own 50% of a company that owns 50% of the borrower, you are treated as owning 25% of the borrower and must sign.

Who else may be asked to sign

Lenders can require guaranties from people below 20%, including minority owners, key managers and certain spouses.

• Spouses. When spouses together with minor children own 20% or more, each spouse who owns less than 20% must still guarantee in full.
• Non-owner spouses. They do not sign the guaranty itself, but they may need to sign collateral documents for jointly owned property.
• Key people. The lender or SBA can require a full or limited guaranty from anyone critical to the business, regardless of ownership.
• Recent sellers. Under the six-month lookback, anyone who held 20% or more within six months before the application stays on the hook unless they fully divested and cut all ties to the business.

Each guarantor, except supplemental guarantors, must also provide a personal financial statement. That statement is SBA Form 413 or the lender's equivalent; see the full SBA loan requirements for the rest of the file.

Unlimited vs limited guaranties

Owners of 20% or more give an unlimited guaranty. Limited guaranties, capped by amount, time or collateral, are only used for additional guarantors the lender chooses to add.

You cannot negotiate a 20%-plus owner down to a limited guaranty. That is a program rule, not a lender preference.

What a personal guaranty actually puts at risk

If the business defaults and collateral does not cover the balance, the lender and then the government can pursue the guarantor's personal assets and income.

Illustrative example. A bakery borrows $300,000. Two owners hold 60% and 40%. The bakery closes with $180,000 still owed. Equipment sells for $40,000, leaving $140,000. Both owners guaranteed in full, so each can be pursued for the entire $140,000, not just a 60/40 split. How they settle between themselves is a separate matter.

Collateral rules add a second layer. For larger 7(a) loans that are not fully secured by business assets, lenders may take a lien on owners' personal real estate. Current SBA rules say a lender is not required to take that lien when the property has less than 25% equity. Ask your lender early how your home will be treated.

After a loss to the government, collection can include tax refund offsets and wage garnishment. See what happens when you default on an SBA loan.

Ways to manage guaranty risk

You cannot avoid the guaranty as a 20%-plus owner, but you can limit how much you borrow, how collateral is structured and how you plan for a downturn.

1. Borrow to the project, not the maximum. Every extra dollar is personally guaranteed.
2. Run a downside case. Model payments if revenue fell 25% for six months. If that breaks the business, shrink the loan or extend the term.
3. Keep personal and business finances separate. It does not remove liability, but it keeps records clean if you ever need a workout.
4. Talk to your lender at the first sign of trouble. SBA lenders have workout tools, such as deferments and re-amortization, that are easier to use before a default.
5. Ask a professional about asset protection before you sign, not after. Rules vary by state.

Do non-SBA loans need personal guaranties too?

Most small business financing includes some form of personal guaranty or validity guaranty, so read the agreement either way.

Banks almost always ask for one. Online term loans and lines of credit commonly do too. Revenue-based financing agreements often use a performance or validity guaranty, which is triggered by things like diverting sales or closing the account rather than by a simple drop in revenue, though terms differ by funder. Our guide to the personal guarantee explains the variations. ROI Funder shows the cost, payback period and guaranty terms on each offer before anyone signs.