How to De-Risk the Personal Guarantee

Many lenders do look at this as another form of collateral. You know. You know, you need to be careful whenever you bring a new insurance policy to market. You don't really want behavior to change too much.

We don't want lenders to see this and then take undue risks with this new insurance policy. You did mention the one type of behavior that we would like to see, and it's more people coming into the system, people that would have avoided the SBA loan previously because of the pg. Now there's a way to kind of wrap their head around the risk and reduce it by 50%.

Well, on that point, one of the interesting wrinkles here, dynamics to the pg, is that in many cases, these. These would be SBA acquirers that we keep talking about that make the calculated decision not to do this because it's just too much risk, because let's say they have a family and they have a mortgage, and they just do not feel it would be responsible to put. To make their kids homeless.

And I'm going to give you guys a quote here. Th. Those types of people are al. Also by nature of being further along in Life and having a family and having real estate or a home are likely going to be more established, more experienced further in their careers and therefore better qualified.

And it's sort of in a sort of statistical sense, you know, it's all case by case but in theory a better, stronger borrower because they are mid-40s, 50s, that person is probably more equipped to, you know, jump into an sb, into a small business as owner of that small business than a 29 year old. So I actually there was very timely. There was a post on Search Funder just a couple days ago last…

Um, David's Let me quote him and I just want to read it for, for the audience, but it captures this perfectly. Okay, so this is an excerpt from, from his post. Quote. After two plus years of part time searching across a number of industries in my geo, my search has ended in keeping my day job.

Now this wasn't a failure to find deals. I found a lot of interesting businesses. It was a failure to tolerate risk.

I could have closed on a number. Of deals, but I never solved for the house. With a young family, I was not.

Willing to put my primary residence on the line for an SBA loan and. Potentially make us homeless. Zero risk tolerance when it comes to my house.

I tried everything to get around it,. HELOC, leasebacks, ABL, etc. And then he later says I'm happy.

To put skin in the game but. Just don't threaten to make my kid homeless. End quote. Now if you look at David's LinkedIn, he's seems like a very strong borrower, a very well positioned professional to go buy and run a business successfully.