Glossary · People and paperwork
Principal (Individual)
In short
Any individual owning 20% or more of the business, or who holds a key management role. These individuals are heavily scrutinized by the SBA due to their influence and required personal guarantees.
What it means in a deal
For an SBA 7(a) loan, all Principals must complete SBA Form 1919 and undergo character and credit checks. They are also required to provide a Personal Guarantee for the loan, putting their personal assets at risk. Understand that this extends beyond just equity owners to key managers.
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 (Individual)
- Does a partner buyout require 100% ownership by the acquiring individual?
- What is the maximum ownership percentage for an individual to avoid personal guaranty?
- Who must provide consent for a business to obtain life insurance on an individual?
- For general business protection, should the business or individual owners own the life insurance policy?
- If multiple owners each guarantee the loan, are their liabilities typically joint and several or individual?
- What is the maximum amount an individual can personally guarantee for an SBA 7(a) 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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