The Truth About SBA 7a Collateral Requirements

SBA 7(a) loans require personal guarantees from anyone who owns 20% or more of the business, but it doesn't stop there. Guarantors may also be required to pledge "all available collateral." It's important to understand the difference between SBA requirements and the requirements of the specific lender with which you're working.
In this video, SBA Ray exposes the truth about SBA 7a Collateral requirements so don't get taken advantage of by the bank.

[@Rubenfeletoa]

Super informative and I can see how your experiences are shining through

[@haglermarviin]

What's the difference between the affiliate guarantee, personal guarantee, and borrower guarantee?

[@SBA_Ray]

@@haglermarviin affiliates are other companies you own, personal is yourself or anyone who owns 20%+ of the borrowing entity, and the borrower is a borrower, not a guarantor. The borrower is the business benefiting from the loan proceeds. Anyone who is a borrower and/or guarantor is responsible for the loan getting repaid.

[@buckeyebrutus8229]

My broker telling me lender is looking for 100% collateral to match loan amounts is that SBA rule or just lender’s preference like you explained in video?

[@SBA_Ray]

Sounds like that is that lenders preference. Very conservative!

[@winstonlambert8859]

Who do you know that I can talk to about discussing my SBA loan plans? Is this something you can advise?

[@SBA_Ray]

My company provides SBA 7a loans ranging from $500,000 to $5 million for business acquisition, partner buyouts, CRE, and expansion. If you need assistance with that, I’d be happy to help. Just email my associate Todd at [e-mail] to set up a time to talk.

[@Gee-OT]

I'm an investor looking to acquire my first business. I don't have much collateral but I have excellent credit. I would love to talk to someone about my funding options. Is that something you could help with?

[@DatsDoodoBaby]

For a friend, do you have to be in business already to receive this loan? What if you have a business you want to buy but you yourself don’t have an actual business yet, can you still apply for this? Additionally are there other loan options available, not for the scenario above, but for someone who is in business? As an example someone in business generating 3 million EBITDA needs a loan for 3 million for whatever reason, is SBA the best option? Only option, or are there alternatives?

[@SBA_Ray]

SBA 7a loans can be used for a variety of uses - and acquiring your first business is definitely one of them. SBA Lenders need to understand the specific use of proceeds, we can't just give loans for whatever reason. Depending on the reason, the SBA 7a loan may or may not be a solution. If you'd like more information feel free to inquire with us at www.sbaray.com

[@enoessien7641]

Totally my experience…spot on

[@ercaudits174]

Great Video Ray! Very informative !

[@DavidMKirchner]

Hey Ray - do you have a calendar I could book a call on? I’m interested in buying a place of business for My business. (Currently renting) loved this video and several others. Thank you for all of the info

[@SBA_Ray]

Yes, just make an inequity on the site and we’ll help you out: www.sbaray.com/loan

[@ryanleedham7391]

So if a 4mil loan with only 200k collateral is possible in your example, would you say getting a 500k loan with little to no collateral is possible?

[@SBA_Ray]

Collateral is not required if it’s not available, but each lender makes their own decisions

[@DavidJohnson-gc1be]

Do you know if vested employee stock options would count as collateral? I’m thinking not due to the volatility and insider trading limiting the timing of selling. It would be amazing if it were possible though.

[@SBA_Ray]

No

[@ryankeenan351]

Thanks for the information! Was wondering if a SBA loan will show up on your personal credit report? I know you will have to personally guarantee it tho.

[@SBA_Ray]

I don’t think so but I guess it depends on the specific credit report you pull. If you pull your typical consumer credit report you won’t see it

[@chicagollama]

This is great man. Thanks

[@brennenwick6199]

So if I'm an experienced Operator who has been a senior executive in a Fortune 100 company and wants to buy a business with 20% down can I do that without pledging personal collateral on my home which I have 42% equity? If not are there any reasonable alternatives I can do instead of a SBA Loan? Just definitely do not feel comfortable putting my house up as collateral.

[@SBA_Ray]

The cut off is 25% equity so it would need to be pledged. SBA is pretty much the only game in town outside of cash and seller notes when it comes to business acquisitions in the $1-6mm space.

[@MH3210]

What are cash flow requirements?

[@SBA_Ray]

Cashflow requirements are referred to as Debt Service Coverage Ratios and the SBA requires a minimum of 1.15x on the business and 1.0 globally.

[@kevinroberts7255]

Great video insights Ray!

[@SBA_Ray]

Thanks!

[@mxd8]

what about 504?

[@SBA_Ray]

This channel focuses on the SBA’s flagship program: the 7(a)

[@Alixi2012]

Thank you for the info.

[@SBA_Ray]

Thanks for watching!

[@victorrivers1512]

I know we probably won’t get approved to purchase a commercial building for religious use but we don’t down payment but we have been renting for 4 years.

[@SBA_Ray]

You are correct. Businesses that promote religion are not eligible for SBA financing.

[@diamondvideos1061]

Is it a good idea to talk to lenders before a specific business has been identified? Since there is no pre-approval concept in SBA loans, it'd be nice to know what is feasible, possible, and not likely when going after a deal.

[@SBA_Ray]

Yes, it would be a good idea. SBA loans are a whole nother bread. First time buyers will encounter a very steep learning curve. The sooner you start learning the ins and outs the better.