{"ok":true,"canonical_url":"https://dealroom.so/glossary/under-collateralized","api_url":"https://dealroom.so/api/public/glossary/under-collateralized","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":"under-collateralized","term":"Under-Collateralized","group":"The loan itself","definition":"This describes a loan where the value of the assets pledged as security is less than the loan amount. Most SBA 7(a) loans are under-collateralized by design, focusing on cash flow.","what_it_means":"Don't be surprised if your SBA 7(a) loan is under-collateralized; it's common for business acquisition loans. The SBA's guaranty makes up for this collateral shortfall. While your lender will still take all available business and personal collateral, the primary focus is on the business's ability to generate cash flow.","url":"https://dealroom.so/glossary/under-collateralized","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"},{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"}],"related":[{"slug":"collateral","term":"Collateral","url":"https://dealroom.so/glossary/collateral"},{"slug":"collateral-shortfall","term":"Collateral shortfall","url":"https://dealroom.so/glossary/collateral-shortfall"},{"slug":"recourse","term":"Recourse","url":"https://dealroom.so/glossary/recourse"}],"related_questions":[{"question":"What specific collateral must be taken when a 7(a) loan is under-collateralized by business assets, even with a blanket lien?","url":"https://dealroom.so/for-lenders/questions/what-specific-collateral-must-be-taken-when-a-7-a-loan-is-under-collateralized-by-business"},{"question":"Can a partner buyout be done with zero money down under the SBA?","url":"https://dealroom.so/sba-7a/questions/can-a-partner-buyout-be-done-with-zero-money-down-under-the-sba"},{"question":"Under what conditions can a seller note on full standby be repaid early?","url":"https://dealroom.so/sba-7a/questions/under-what-conditions-can-a-seller-note-on-full-standby-be-repaid-early"},{"question":"How does the SBA determine affiliation for businesses operating under a license agreement?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-determine-affiliation-for-businesses-operating-under-a-license-agreement"},{"question":"When does identity of interest trigger affiliation for size determination under SBA rules?","url":"https://dealroom.so/for-lenders/questions/when-does-identity-of-interest-trigger-affiliation-for-size-determination-under-sba-rules"},{"question":"How does the SBA define an \"associate\" for affiliation purposes under 13 CFR 121?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-an-associate-for-affiliation-purposes-under-13-cfr-121"}]},"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 — Under-Collateralized","url":"https://dealroom.so/glossary/under-collateralized","source_type":"DealRoom Data"}}