{"ok":true,"canonical_url":"https://dealroom.so/glossary/liquidation-expense","api_url":"https://dealroom.so/api/public/glossary/liquidation-expense","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"liquidation-expense","term":"Liquidation Expense","group":"Doing the deal","definition":"Costs incurred by the lender when selling collateral after a loan default. These expenses reduce the net recovery from the sale, directly impacting what's left to cover the loan.","what_it_means":"If a loan defaults and collateral needs to be sold, the lender will incur liquidation expenses such as legal fees, storage costs, and sales commissions. These costs are deducted from the sale proceeds before applying them to the outstanding loan balance. Understand that your personal guarantee covers not just the loan principal but also these associated costs, increasing your potential liability.","url":"https://dealroom.so/glossary/liquidation-expense","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"liquidation","term":"Liquidation","url":"https://dealroom.so/glossary/liquidation"},{"slug":"foreclosure","term":"Foreclosure","url":"https://dealroom.so/glossary/foreclosure"},{"slug":"loan-default","term":"Loan default","url":"https://dealroom.so/glossary/loan-default"},{"slug":"personal-guarantee","term":"Personal guarantee","url":"https://dealroom.so/glossary/personal-guarantee"}],"related_questions":[{"question":"How does business overhead expense insurance differ from key-person life insurance?","url":"https://dealroom.so/sba-7a/questions/how-does-business-overhead-expense-insurance-differ-from-key-person-life-insurance"},{"question":"What is the process for a lender to obtain SBA approval for extraordinary liquidation expenses?","url":"https://dealroom.so/for-lenders/questions/what-is-the-process-for-a-lender-to-obtain-sba-approval-for-extraordinary-liquidation-expe"},{"question":"What specific documentation is required in the Universal Purchase Package (UPP) to support eligible liquidation expenses?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-in-the-universal-purchase-package-upp-to-support-e"},{"question":"How does a lender properly account for eligible liquidation expenses within the Universal Purchase Package (UPP)?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-properly-account-for-eligible-liquidation-expenses-within-the-universal-"},{"question":"How should a lender document eligible liquidation expenses within the UPP for a 7(a) guaranty purchase?","url":"https://dealroom.so/for-lenders/questions/how-should-a-lender-document-eligible-liquidation-expenses-within-the-upp-for-a-7-a-guaran"},{"question":"What specific documentation must a lender include in the Universal Purchase Package (UPP) to justify liquidation expenses?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-must-a-lender-include-in-the-universal-purchase-package-upp-to"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Liquidation Expense","url":"https://dealroom.so/glossary/liquidation-expense","source_type":"DealRoom Data"}}