What Types of Business Loans Does Personal Guarantee Insurance Cover?
Personal Guarantee Insurance currently covers personal guarantees on SBA 7(a) and SBA 504 loans between $500,000 and $5 million, used for business acquisition, expansion, or refinance. Coverage can be purchased at loan closing or within six months of closing, insures up to 80% of the personal guarantee amount, and carries limits up to $2.5 million.
If your loan fits that description, you are in the eligible core of the first personal guarantee insurance product offered in the United States. If it does not, this article explains why coverage starts where it does, which loan situations qualify in practice, and what is likely to come next as the category grows.
The Covered Loans: SBA 7(a) and SBA 504
The SBA's two flagship programs are the backbone of American small business finance, guaranteeing tens of billions of dollars in loans every year. The 7(a) program funds acquisitions, expansions, working capital, and refinancing; the 504 program finances major fixed assets, typically owner-occupied real estate and heavy equipment, through a bank loan paired with a CDC debenture. They are also where personal guarantee exposure is most universal: the SBA requires an unconditional personal guarantee from every owner of 20% or more of the borrowing business, in both programs. There is no negotiating it away.
That combination, enormous volume and mandatory guarantees, is why PGI covers SBA lending first. It is where the most borrowers carry the most unavoidable personal risk.
There is a second, less obvious reason. Pricing a brand new insurance product responsibly requires decades of loss history, and the SBA's public data made that possible. BRIC's underwriting is built on analysis of nearly 2 million SBA loans issued since 1991, which is what allows premiums to be set with statistical confidence rather than guesswork. No comparable dataset exists for most other loan categories, yet.
Loan Purposes That Qualify
Within the covered SBA programs, three loan purposes are eligible:
Business acquisition. Buying an existing business, the classic path for entrepreneurship through acquisition (ETA) operators, search fund principals, and individual buyers. Acquisition loans are typically the largest guarantees individuals ever sign, often $1 million to $4 million, making them the most common case for coverage. Franchise purchases financed through SBA 7(a) loans fall in this category as well.
Expansion. Borrowing to grow an existing business: a second location, major equipment, added capacity, or working capital to support growth.
Refinance. Replacing existing business debt with a new SBA loan. A refinance closing creates a new personal guarantee, which also makes refinancing the practical route to coverage for owners whose original guarantee is older than the six-month application window.
The Full Eligibility Picture
Loan type is the first screen. The complete current criteria:
• Loan program: SBA 7(a) or SBA 504
• Loan size: $500,000 to $5,000,000
• Loan purpose: acquisition, expansion, or refinance
• Timing: apply at loan closing or within six months of closing
• Loan status: current, with no prior delinquency
• Borrower: U.S. citizens residing in an eligible state
Coverage is currently available to borrowers in 43 states. The seven exceptions today are California, Connecticut, Florida, Iowa, Maine, Maryland, and New York, with additional approvals expected over time as regulatory work expands.
Underwriting then evaluates the specific loan: the business's industry, debt service coverage ratio, loan-to-value, the guarantor's personal net worth, loan term, and lender quality. Approved policies are written on 12-month renewable terms on A-rated carrier paper.
Loan Types Not Currently Covered
Being direct about what is outside the current product is part of earning trust in a new category. PGI does not currently cover guarantees on:
• Conventional bank term loans made outside the SBA program
• Business lines of credit, including SBA Express lines
• Online and fintech lender loans and merchant cash advances
• Equipment leases and commercial real estate leases, which often carry their own personal guarantees
• SBA loans under $500,000 or over $5 million
If your guarantee sits in one of these categories, the risk is no less real, and the same discipline applies: understand whether your guarantee is limited or unlimited, know your joint and several exposure, and revisit the structure with your lender where possible. The category is young, and covered loan types will expand, starting with the one described next.
Coming Next: Conventional Loans
The first expansion is already in motion: BRIC is preparing to extend Personal Guarantee Insurance to conventional business loans in the near future.
Conventional term loans, the loans banks make outside the SBA program, are the largest neighboring pool of personally guaranteed debt in the country. Banks require personal guarantees on the substantial majority of small and mid-sized business credit, and those guarantors carry the same uninsured exposure SBA borrowers do: personal liability for the balance plus interest, fees, and collection costs, with no insurance product available to them. Extending coverage there is the natural next step for the category.
For borrowers, the practical takeaway is simple. If you hold or are negotiating a conventional loan with a personal guarantee, coverage is coming, and registering your interest at personalguarantee.com is the best way to be notified the moment conventional loans become eligible. If you are choosing between an SBA loan and a conventional loan today, note that 7(a) and 504 guarantees in the eligible range can be insured now.
A Worked Example
A buyer acquires a manufacturing business for $3.2 million, financed with a $2.5 million SBA 7(a) loan. At closing, the buyer signs an unconditional personal guarantee, as the SBA requires. The loan checks every eligibility box: 7(a) program, within the size range, acquisition purpose, applied for at closing.
The buyer elects coverage at 80% of the guarantee. If the business later fails and the lender enforces the guarantee, the policy pays a one-time cash settlement of up to $2 million directly to the lender. The buyer's remaining personal exposure is roughly $500,000 instead of $2.5 million plus interest, fees, and collection costs. The annual premium runs 2% to 4% of the covered amount, a planned operating cost in exchange for capping the largest personal risk in the deal.
Frequently Asked Questions
Does Personal Guarantee Insurance cover SBA loans? Yes. SBA 7(a) and SBA 504 loans between $500K and $5M are exactly what the current product covers, for acquisition, expansion, or refinance purposes.
Does it cover conventional bank loans or lines of credit? Not yet. Coverage today is specific to SBA 7(a) and 504 loans, but conventional loans are the next planned expansion, coming in the near future. Register interest at personalguarantee.com to be notified when conventional loan guarantees become eligible.
Can franchise buyers get coverage? Yes, when the franchise purchase is financed with an SBA 7(a) loan in the eligible size range, which is how a large share of franchise acquisitions are funded.
What percentage of the guarantee is covered? You select a coverage level up to 80% of the personal guarantee amount, with policy limits up to $2.5 million.
My loan closed last year. Does it qualify? Not within the standard window, which runs six months from closing. Refinancing the loan creates a new guarantee that qualifies at the new closing, and for loans with a strong performance record, BRIC can in certain circumstances seek carrier approval for an exception to the window.
Is coverage available in my state? Coverage is live in 43 states today. The exceptions are California, Connecticut, Florida, Iowa, Maine, Maryland, and New York; if you live in one of those, eligibility is expanding as regulatory approvals are completed.