When you’re looking to take an SBA 7(A) loan, your lender will most likely try to secure the loan if you have enough collateral. For that reason, you should be ready to offer up your personal assets as collateral when trying to obtain an SBA 7(A) loan.
If, however, you have insufficient collateral, you may be able to obtain an unsecured loan with little collateral conditions if your loan is small enough that the lender agrees to take the risk without business collateral.
Loan collateral is the guarantee used to make sure lenders have a secondary source of repayment in case the borrower is unable to make payments on his or her SBA loan. This business collateral can be any assets your business has. For example:
- Your business’ real estate
- Inventory
- Machinery
- Equipment
Not only that but the borrower’s personal assets too can be considered collateral.
If the loan you aim to obtain is greater than 350,000$, and your business assets do not make for sufficient collateral, the party that lends you the money must show the Small Business Administration that you own personal assets that can serve as collateral requirements for your loan. This can be very discouraging for a lot of people who want to obtain an SBA loan. That’s why we encourage you to discuss with your lender all and any options about setting personal assets as security for your loan.
Let’s say you applied for an SBA loan, what are the collateral requirements that you might face? Well, you will be subject to an ABA lien, that is an All Business Assets lien or otherwise named, a blanket lien. In short, this means everything that your business owns is required as collateral for your Small Business Association loan. If these business assets are insufficient, however, then you will need to list other assets for your collateral requirements.
Your SBA lender will make you fill out a document called “SBA Eligibility Questionnaire for Standard 7(A) Guaranty. This form assists you to list all your collateral so your lender can have a clear picture of your assets and determine if you have enough for your collateral requirements for a Small Business Association loan. This questionnaire covers matters such as negligible businesses, business size standards, affiliations, personal resources, and use of proceeds.
Finally, let’s discuss who is the party responsible for the business collateral requirements on your loan. Well, anyone who owns twenty percent or more of your business will be obliged to have their business and personal assets reviewed by the lender for collateral requirements. As a business owner, even if your personal assets are not used for collateral, you are still held responsible for making sure payments are made in full and on time.
If you miss any payments, you will have to work with your lenders to change your amortization schedule so you can maintain both your daily operations and loan payments and obligations. In case you miss multiple payments, your lender can demand the loan payment in full, which will force your business to liquidate its assets to repay the lenders as soon as possible.
Sky Small Business Loans 630 5th Ave #8, New York, NY 10111 (212) 457-1581 https://skybusinessloans.com/
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