The statistics are revealing. Last year, approximately 15% of SBA guaranteed loans failed. This resulted in the borrowers’ personal guaranties being called on which puts a family home at risk if a borrower’s spouse signs the guaranty.

The absurdity of this situation, the underlying reason this even exists, is simply to control the borrower and thus have huge influence over them by controlling their home. This is done even when there is no equity in the home and thus a subordinate lien has no real financial meaning other than to control and intimidate the borrower. The threat of attacking one’s home results in the borrower doing things which ought not be done, such as invading ones 401k, borrowing money that should not be borrowed, and paying out more than one can afford, putting the entire family at risk.

Keep in mind, the SBA guaranty is up to 90%, thus, the lending bank has very little at risk and the SBA does not require a spousal guaranty for approval; this is a bank tactic and it is underhanded.

In fact, since we handle hundreds of SBA loans in workout, we can testify that a number of borrowers simply refuse to have spousal guaranties and the loans still went through. It is not a requirement. It is underhanded, it is abusive and it is unnecessary. The cost is too high, the risk too great and I strongly urge new borrowers to hang tough and refuse to have their spouse sign. You will get the loan without the spousal signature, so call their bluff. If you default, you will not regret this decision.

If you are refused the loan then move on. In the end it is not worth the risk, or the cost.