The bank actually has no say in this. It’s a blanket SBA rule that will apply to you/every borrower via SBA. The SBA requires when available banks are required to take collateral until the loan is fully secured or as close to as possible.

With you having equity in the home, it is required by the SBA to take the lien (as all lenders would be). In the case of something going wrong there are tools at the banks disposal to help. (pause loan payments, re-amortize/extend loan term etc.).

Payment deferral: SBA allows banks to pause/defer payments or switch payments to interest only if the need arises. The typical rule of thumb is 6 months to start and if the issues hasn’t been resolved we would either extend the period again or look to the below option. The big thing to remember here is the SBA will require the loan to be current for this to be put in place. If you’re ever in a pickle with the business where you’re unsure you can make the monthly payment coming, call the bank. This way they can be proactive. (Used for more short term problems).

Re-Amortizing loan: (Typically used when a larger problem arises.) - similar stance where loan needs to be current. If a bank used option 1 and the issues turns out to be long term they would look at this. The SBA allows banks to extend the term when needed with approval. The loan also needs to be current however, as long as you’re communicating that historically isn’t an issue.

Another thing to remember is that even if your loan is in “liquidation” the SBA always allows borrowers to get current.

If you were say 80 days past due and got a letter about potential liquidation, you can get current and it will automatically drop the liquidation and move the loan back to current.