Wednesday, August 18, 2010

SBA Loan Basics for Borrowers- Does an SBA loan need collateral?

SBA requires lenders to seek ALL available collateral. While a SBA loan should not be turned down due to a lack of collateral, lenders need to take as much collateral as they can.

Lenders first look to the business assets such as equipment. Inventory and accounts receivable are excluded.

If the business assets are not enough to secure the loan, the borrower may have to offer personal assets such as a second or third trust deed on the home. If the borrower has equity in excess of 25 percent of the market value of the home, SBA considers that to be worthwhile and will want the lender to use that if the business assets don't fully secure the loan.

A personal guarantee is required on all SBA borrowers.

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