Many small businesses carry SBA loans — loans backed by the federal government that almost always include a personal guarantee from the business owner. When a business makes an ABC, the SBA loan creates specific issues that require careful handling.
The SBA’s Role in an ABC
The SBA, through the lending bank, is typically a secured creditor with a lien on all business assets. After the assignment, the assignee must deal with the SBA lender just like any other secured creditor. Any deficiency becomes either a general unsecured claim (for the business entity’s portion) or a personal liability of the owner under the personal guarantee.
The SBA can and does pursue personal guarantees after business failures. Unlike some commercial lenders who write off small deficiencies, the SBA has an obligation to pursue recovery. Business owners who have SBA loans and are considering an ABC need to understand that the personal guarantee exposure is real and often significant.
The California ABC System gives business owners and creditors the exact tools, templates, and step-by-step guidance to navigate an Assignment for Benefit of Creditors — faster and cheaper than bankruptcy. Request your free evaluation here.
California ABC System — Assignment for Benefit of Creditors 
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