Most SBA loans do require a personal may provide, meaning you sign a document promising to repay the debt yourself if your business cannot

A personal may provide is a legal promise that you, as the business owner, will repay the loan with your own money and assets if the business fails to do so. The Small Business Administration (SBA) itself does not make loans — it insures loans made by banks and other lenders. Those lenders almost always require a personal may provide from the owner or owners of the business before they will fund an SBA loan.

When you sign a personal may provide, the lender can pursue your personal assets — your house, car, savings account, or other property — if the business defaults. This is different from a business loan without a may provide, where the lender's only recourse is the business itself and its assets. The personal may provide makes you personally liable for the full loan amount.

The SBA does not set the personal may provide requirement itself. Individual lenders decide whether to require one, and most do. Some lenders may waive the requirement for larger loans or for borrowers with strong personal credit and significant business assets, but this is uncommon. You should ask the lender directly whether a personal may provide is required before you explore.

Key Takeaways

  • A personal may provide means you are legally responsible for repaying the SBA loan from your own assets if your business cannot pay.
  • Banks and lenders require personal guarantees on most SBA loans, not the SBA itself — the SBA only insures the loan.
  • When you default, the lender can pursue your house, savings, vehicles, and other personal property to recover the debt.
  • Some lenders may waive the personal may provide for very large loans or borrowers with strong credit and substantial business assets, but this is rare.

How a personal may provide affects your liability

Signing a personal may provide removes the legal boundary between you and your business. Normally, a business is a separate legal entity, and creditors can only go after the business's assets, not yours. A personal may provide breaks that wall. If the business owes $150,000 and has $40,000 in assets, the lender can come after you for the remaining $110,000.

The lender does not have to pursue the business first. They can go directly to you, freeze your bank accounts, garnish your wages, or place a lien on your home. If you own the business with a partner or spouse, the lender can pursue either or both of you for the full amount — they do not have to split the debt between you.

The personal may provide typically survives even if you sell the business. If you sell and the new owner defaults, you may still be liable unless the lender explicitly releases you from the may provide in writing. This is a critical detail to negotiate before you sell.

Which SBA loan programs typically require personal guarantees

The SBA offers several loan programs, and personal guarantees are standard across most of them. The SBA 7(a) loan program, which is the most common, almost always requires a personal may provide from all owners with 20 percent or more stake in the business. Some lenders may require guarantees from all owners regardless of ownership percentage.

The SBA Microloan program (loans up to $50,000) also typically requires a personal may provide. The SBA Express program, a faster version of the 7(a) loan, follows the same requirement. The SBA Disaster Loan program, used after hurricanes, floods, or other disasters, may have different rules — some disaster loans do not require a personal may provide, but you should confirm with the lender.

The SBA Paycheck Protection Program (PPP), which was part of the COVID-19 relief effort, did not require a personal may provide for the loan itself, though owners had to sign documents confirming the business met the program's requirements. That program is no longer open to new borrowers.

What happens if you refuse to sign a personal may provide

If you refuse to sign a personal may provide, most lenders will not fund the loan. The personal may provide is a standard condition of SBA lending, and lenders view it as essential to their willingness to lend. Without it, they have no recourse beyond the business itself if things go wrong.

You can ask the lender whether they will waive the requirement, but be prepared for a no. Some lenders may offer alternatives, such as a limited may provide (where you may provide only a portion of the loan) or a may provide that expires after a certain number of years of on-time payments. These alternatives are uncommon and usually only available for larger loans or very strong borrowers.

If you cannot get a personal may provide waived and you are uncomfortable with the risk, you have the option to decline the loan and explore other funding sources, such as a conventional bank loan, a line of credit, or equity financing from investors.

Personal guarantees and business structure

The type of business structure you choose — sole proprietorship, partnership, LLC, or corporation — does not eliminate the personal may provide requirement. Even if you form a corporation or LLC to shield your personal assets, the lender will still ask you to sign a personal may provide. This is because the SBA wants to may support that the person who controls the business is personally invested in repaying the loan.

If you own the business with others, each owner with a significant stake (usually 20 percent or more) will be asked to sign the personal may provide. This means all of you are jointly and severally liable — the lender can pursue any one of you for the full amount, and that person cannot claim that the others should pay their share first.

Releasing yourself from a personal may provide

Once you have signed a personal may provide, you remain liable until the loan is paid off or the lender releases you in writing. Paying off the loan is the clearest way to end your liability. When the loan is fully repaid, the may provide ends automatically.

If you want to be released before the loan is paid off — for example, if you are selling the business or stepping back from ownership — you must ask the lender directly. Some lenders will release you if the new owner or remaining owners sign a new personal may provide. Others will not release you under any circumstances. This is a negotiation point, and the lender has no obligation to agree.

If you are selling the business, include the release from the personal may provide as a condition of the sale. Make sure the purchase agreement requires the buyer to assume the SBA loan and sign a new personal may provide, and that the lender agrees to release you in writing before the sale closes.

Personal guarantees and your credit

A personal may provide does not directly appear on your credit report. However, if the business defaults on the SBA loan and the lender pursues you personally, they may file a judgment against you in court. That judgment will appear on your credit report and can severely damage your credit score.

If the lender sues you and wins, the judgment can stay on your credit report for seven years or longer, depending on your state. This makes it harder to borrow money for personal needs, such as a mortgage or car loan, and can affect your ability to rent an apartment or even get a job.

Frequently Asked Questions

Can I get an SBA loan without a personal may provide?

Most SBA loans require a personal may provide from owners with 20 percent or more of the business. Some lenders may waive the requirement for very large loans or borrowers with exceptional credit and substantial business assets, but this is rare. Ask the lender directly whether they will consider a loan without a may provide.

If I have a partner, are we both liable for the full loan amount?

Yes. If you both sign the personal may provide, you are jointly and severally liable, meaning the lender can pursue either or both of you for the entire debt. The lender does not have to split the amount between you or pursue one of you first.

What is the difference between a personal may provide and a co-signer?

A personal may provide makes you liable for the loan as the business owner. A co-signer is someone else (not an owner) who agrees to repay the loan if you do not. Both create personal liability, but a co-signer is typically a separate person brought in to strengthen the process.

Does paying off the SBA loan release me from the personal may provide?

Yes. Once the loan is fully repaid, the personal may provide ends automatically. If you want to be released before the loan is paid off, you must ask the lender in writing, and they are not required to agree.

Can the lender pursue me personally if the business files for bankruptcy?

Yes. A personal may provide survives a business bankruptcy. Even if the business discharges the SBA loan in bankruptcy, the lender can still pursue you personally for the debt because you signed a separate personal may provide.