If you`re considering applying for a Small Business Administration (SBA) loan, it`s important to be aware of the SBA Agreement of Prior Lienholder. This agreement is a legally binding contract between the SBA and a prior lienholder, typically a bank or other lending institution, that allows the SBA to take priority over the lienholder in the event of default by the borrower.
What is a Lienholder?
A lienholder is someone who has a legal claim on a borrower`s property, usually as a result of a loan or other financial obligation owed to them. In the case of an SBA loan, the lienholder is typically a bank or other financial institution that has provided financing to the borrower.
What is the SBA Agreement of Prior Lienholder?
The SBA Agreement of Prior Lienholder allows the SBA to take priority over the lienholder in the event of default by the borrower. This means that if the borrower is unable to repay the loan, the SBA will have the first claim on any assets the borrower may have put up as collateral to secure the loan.
Why is the SBA Agreement of Prior Lienholder important?
The SBA Agreement of Prior Lienholder is important for several reasons. First, it provides additional security for the SBA, which makes it more likely that lenders will be willing to provide financing for small businesses. Second, it can help small business owners get access to the capital they need to start or grow their businesses.
What are the implications of the SBA Agreement of Prior Lienholder for small business owners?
Small business owners who are considering applying for an SBA loan should be aware of the implications of the SBA Agreement of Prior Lienholder. First, it means that if they default on the loan, the SBA will have a claim on any property they have used as collateral. Second, it means that they may need to seek permission from the SBA before making any changes to the collateral that they have put up to secure the loan.
In summary, the SBA Agreement of Prior Lienholder is an important component of the SBA loan process. Small business owners should be aware of its implications before applying for an SBA loan, and they should be prepared to work with the SBA and any prior lienholders to ensure that their loan is secured appropriately. With the right planning and preparation, an SBA loan can be a valuable tool for small business owners looking to start or grow their businesses.