SBA rules · SOP 50 10 8.1

Can an SBA loan be paired with a conventional loan (pari passu)?

Yes, an SBA loan can share collateral on a pari passu basis with a conventional loan under both the 7(a) and 504 programs, subject to specific maturity and structuring conditions.

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

In detail

7(a) loans: A shared (pari passu) lien position with the lender is permitted and is not considered prohibited piggyback financing, provided that the maturity of the non-SBA guaranteed loan is not shorter than the maturity of the SBA-guaranteed loan.
504 loans: While SBA typically takes a second lien position on Project Property, it may take a shared lien (pari passu) with the Third Party Lender.
504 mixed-use assets: When a 504 debenture finances both real estate and significant shorter-term assets like machinery and equipment, the CDC should consider taking lien positions with the Third Party Lender based upon proportional shares in the project financing.

The source

What the SOP says

“A pari passu lien position is also not piggyback financing when the maturity of the non-SBA loan is not shorter than the maturity of the SBA-guaranteed loan.

SOP 50 10 8.1, Appendix 19: 7(a) Collateral Requirements > Adequacy of collateral (lines 5589-5594)✓ Verified

“SBA usually takes a second lien position on Project Property but may have a shared lien (pari passu) with the Third Party Lender. SBA’s second lien position will generally be considered adequate.

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Adequacy of Collateral: (lines 3579-3588)✓ Verified

“SBA does not consider a shared lien position with the lender (pari passu) to be a piggyback structure when the maturity of the non-SBA guaranteed loan is not shorter than the maturity of the SBA-guaranteed loan.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > Collateral (lines 5280-5290)✓ Verified

“Taking, along with the Third Party Lender, lien positions based upon proportional shares in the financing of the Project;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Mixed Use Collateral: (lines 3596-3601)✓ Verified

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