What happens if you default on an SBA loan?

In preparing to have our biz loan underwritten, what is meant by the SBA's "Personal Guarantee?"?

• Under the guaranty concept, commercial lenders make and administer the loans. The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the borrower remains obligated for the full amount due. --What is meant by this (in lay terms)?

• Answer:

  Your statements are accurate and the hooker is the personal guaranty as it means that whatever is not recovered from debt service and liquidation of collateral by the bank, lands on the shoulders of the personal guaranty where it is all due and collectable. The only way to reduce this debt is either thru payment or an Offer in Compromise which can reduce the debt owed to what we call affordable losses. In short, if the business cannot pay in full the remainder owed is collectable from the guarantors in full. The transactions , guaranty, between the bank and the SBA have nothing to do with the borrower. The SBA will attempt to collect it all from the guarantors and will us whatever means they can especially the US Dept of Justice.