Do I have to pledge my home as collateral for an SBA loan (and other common questions)?

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Do I have to pledge my home as collateral for an SBA 7a loan?

In general, if there is a collateral shortfall, lenders are required to take a home as collateral, provided that there is at least 25% equity in the property.  Many borrowers will “conveniently” take a Home Equity loan a few months before applying for an SBA loan to avoid pledging their home.

Will I be required to pledge my personal guarantee?

If you own at least 20% of the business, then yes.  It’s also worth noting that if you and your spouse own a combined over 20%, both spouses must guarantee (unless 1 spouse owns 0%).  If your spouse is not an owner, but you are required to pledge your home, your spouse will need to sign a limited guarantee (which is limited to their interest in your home).

What is the minimum credit score for an SBA loan?

I’m not sure if the SBA puts official minimums out there, but most lenders want a minimum of 650.  Any less than that will require a good explanation as to why it’s so low.

What will happen to me if my business closes or I can’t afford my SBA loan payments?

Outcomes vary.  The worst case scenario usually involves foreclosure, getting a judgement against you, or both.  When you can’t afford to pay back the loan, the first thing the bank will want to do is sell their collateral (business assets).  The SBA generally doesn’t want banks to go after your home immediately, but will do so if there are no other alternatives.  There is the possibility of a settlement, which is called Offer In Compromise.  I’ve helped borrowers through the OIC process for years with my consulting business called Distressed Loan Advisors (

How long does the SBA loan approval and closing process take?

You can expect it to take anywhere from 30 to 75 days, on average.  If you are buying real estate, it usually is at the longer end of that spectrum due to appraisals.  In general, I tell clients not to get lured by lenders who promise faster closings because every deal is different, and banks always value proper due diligence and documentation over speed.

What’s the most popular SBA loan type?

7a is by far the most popular SBA loan type.  It can be used for a number of purposes including business acquisitions and real estate purposes.

How much should I expect to put down for an SBA loan?

10% equity injection is required.  This can be borrowed, but it’s subject to some very specific conditions. If the equity injection will come from any form of borrowed funds, such as a HELOC or seller financing in excess of the minimum borrower injection requirements, Lender must address the proposed repayment terms as well as any Standby or Subordination terms that will be in place.

Jason Milleisen can answer your questions about applying and being approved for an SBA loan.  Feel free to call (toll free 1-877-436-4533) or email me (   If you retain me to help you with your financing needs, I’ll give you a rebate after your loan closes equal to 10% of my commission, up to $500.

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