Glossary · People and paperwork
Principal Guarantor
In short
A principal guarantor is an owner of 20% or more of the business who must personally guarantee the SBA loan. This means your personal assets are on the hook if the business defaults.
What it means in a deal
As a buyer, if you own 20% or more, you will be a principal guarantor. Understand the full extent of this personal liability, including any spousal guarantees. This is a core requirement of the SBA 7(a) loan, so be prepared to sign the personal guarantee.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Principal Guarantor
- What happens to an SBA loan if a principal owner or guarantor dies unexpectedly?
- What happens if a guarantor moves out of the country during the loan term?
- What happens if a required personal guarantor lacks sufficient personal assets for an effective guaranty?
- What if the partner I'm buying out is also a guarantor on existing business debt?
- When is an SBA Form 912 (Statement of Personal History) required for a non-owner guarantor?
- Can a lender release a personal guarantor without SBA approval if collateral fully covers the loan?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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