SBA guaranty

Definition

The share of a 7(a) loan the government repays if the borrower defaults.

Why It Matters

It is the whole reason a bank will lend against a business's cash flow and goodwill when the hard collateral is not there, and it is capped twice. Per loan it covers 85% at or below $150,000 and 75% above. Across a borrower and their affiliates it stops at $3,750,000 of guaranty in total, which a single top-size 7(a) uses in full. So the buyer who borrows the largest loan the program allows has no guaranteed capacity left for a second business. An affiliate's existing SBA debt comes off the allowance before this deal is measured, and since May 2023 that reaches your own or a partner's other company only through the ownership tests of the affiliation rule. Ask what is outstanding before writing an LOI on a second acquisition. The 504 has a limit of its own, and since July 2026 a 7(a) balance no longer counts against it, so a purchase heavy in real estate or equipment can carry a 504 beside the 7(a); the rule-changes log has the notice.

In numbers: A $5,000,000 7(a) guaranteed at 75% consumes $3,750,000 of guaranty, the entire per-borrower allowance, leaving a second deal of any size with none.