Does the SBA accept cosigners on business loans?

No. The SBA doesn't allow cosigners on its business loans. Instead, it requires personal guarantees from anyone who owns 20% or more of the business. A personal guarantee makes each eligible owner personally responsible for repayment if the business can't pay.

Can you use an LLC as a cosigner for a business loan?

No. Lenders require cosigners to be individuals, not business entities. A cosigner must be someone who can take on personal legal and financial responsibility if the borrower defaults, which an LLC cannot do.

What happens if I default on a business loan with a cosigner?

If you default, the lender can require your cosigner to repay the outstanding balance. Both of you may see negative impacts on your credit reports, which can affect your ability to borrow in the future. A default can also strain your personal relationship with the cosigner.

What are the risks of cosigning a loan?

Cosigners take on full responsibility for the loan if the primary borrower misses payments or defaults. This arrangement can lead to financial strain, damage to the cosigner's credit score and difficulty qualifying for future credit. If the loan is secured, any collateral tied to the loan — including the cosigner's assets — may be at risk.

Can a cosigner be removed from a business loan?

No. Cosigners typically can't be removed from a business loan. While some personal loans offer cosigner release programs, this option is rare for business financing. To remove a cosigner, you'd generally need to pay off the loan or refinance it in your name only.

Wilson Zhang, Writer at Finder

Wilson Zhang

Writer

Wilson Zhang was a contributor for Finder, specialising in investments and robo-advice.

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