SBA rules · SOP 50 10 8.1

Can an SBA loan have a cosigner?

Yes, an SBA loan can have a non-owner personal guarantor, and co-borrowers are permitted in specific transaction structures, but the SOP does not recognize conventional accommodation cosigners.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Non-owner personal guarantors: SBA or the lender may require any individual or entity with no ownership interest to provide a full or limited guaranty when deemed necessary for credit or other reasons. This includes individuals critical to operations, supplemental guarantors required out of caution, or non-owner spouses providing a limited guaranty to pledge jointly held collateral.
Eligible co-borrowers: Co-borrowers are authorized and sometimes required in defined transactions, such as an Operating Company receiving proceeds under an EPC/OC structure, or an acquiring person and the target small business in a change of ownership.
Accommodation cosigners: The SOP contains no concept of an ordinary conventional cosigner or unrelated third-party co-borrower added simply to support credit. Loan proceeds must be used exclusively for the benefit of the eligible small business, and outside parties providing credit enhancement must do so as guarantors.

The source

What the SOP says

“When deemed necessary for credit or other reasons, SBA or, for a loan processed on a delegated basis, the SBA Lender, may require other appropriate individuals or entities to provide full or limited guaranties of the loan without regard to the percentage of their ownership interests, if any. For example, an individual with a minority ownership or no ownership interest in the Applicant or OC who is critical to the operation of the business may be required to provide a personal guaranty (e.g., Supplemental Guarantors).

SOP 50 10 8.1, Chapter 5: Other Core Requirements > Personal Guaranties: (lines 1343-1349)✓ Verified

“The spouse’s guaranty secured by jointly held collateral will be limited to the spouse’s interest in the collateral.

SOP 50 10 8.1, Chapter 5: Other Core Requirements > Guaranty of Spouse: (lines 1350-1353)✓ Verified

“The OC(s) must be a Co-Borrower if it receives any proceeds or if proceeds will be used to purchase any assets for the OC(s) use.

SOP 50 10 8.1, Chapter 2: Special Transaction Structures > For 504 loans (lines 682-698)✓ Verified

“The small business and the Person who is acquiring the ownership interest must be Co-Borrowers. In addition, the Note must be executed, jointly and severally, by both the Person who acquires the ownership interest(s) and the small business whose ownership interest is being acquired.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > Initial Acquisition (lines 5068-5071)✓ Verified

“A 7(a) loan cannot be made solely to an individual. The small business must be either the Borrower or a Co-Borrower.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > The following requirements apply to all change of ownership structures: (lines 5037-5045)✓ Verified

“Loan proceeds must be used exclusively for the benefit of the for-profit business.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Organized for Profit (lines 329-340)✓ Verified

Have a deal in mind?

Tell us about it and we will tell you how these rules apply, and which lenders finance deals like yours.

See if your deal qualifies →Broker or lender? Ask the SOP your own question