Glossary · People and paperwork
Principal Owner
In short
This is any individual who owns 20% or more of the equity in a business. All principal owners of a borrower business must personally guarantee an SBA 7(a) loan.
What it means in a deal
If you're buying a business with partners, anyone owning 20% or more is a principal owner and must sign a personal guarantee. This is a non-negotiable SBA requirement. Ensure all partners understand this obligation before moving forward with a 7(a) loan.
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 Owner
- What happens to an SBA loan if a principal owner or guarantor dies unexpectedly?
- What is the required personal ownership percentage to be considered a 'principal' by the SBA?
- What is the minimum ownership percentage requiring a personal guarantee from a 7(a) loan principal?
- What if an owner has a spouse with significant assets but no ownership in the business?
- When are non-owner spouses of 20%+ owners required to provide a personal guaranty for a 7(a) loan?
- How does the SBA view a change of ownership where the new owner has no prior industry experience?
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.
Know what you'll need before you apply
Tell us about the deal and who's buying — we'll flag the guaranty, eligibility, and paperwork issues that slow SBA approval before they cost you time.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.