{"ok":true,"canonical_url":"https://dealroom.so/glossary/under-collateralized-loan","api_url":"https://dealroom.so/api/public/glossary/under-collateralized-loan","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-loan","term":"Under-collateralized loan","group":"The loan itself","definition":"This is a loan where the value of the assets pledged as collateral is less than the loan amount. The SBA will still guarantee these loans if the business's cash flow is strong enough to cover debt payments.","what_it_means":"Your 7(a) loan might be under-collateralized, especially for service businesses with few tangible assets. The SBA requires lenders to take all available collateral, but the primary repayment source is always the business's cash flow. Don't be surprised if your personal assets are also required as collateral.","url":"https://dealroom.so/glossary/under-collateralized-loan","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-shortfall","term":"Collateral shortfall","url":"https://dealroom.so/glossary/collateral-shortfall"},{"slug":"collateral","term":"Collateral","url":"https://dealroom.so/glossary/collateral"},{"slug":"personal-guarantee","term":"Personal guarantee","url":"https://dealroom.so/glossary/personal-guarantee"},{"slug":"7a-loan","term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"}],"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":"Under what specific conditions does the SBA impose a prepayment penalty on 7(a) loans?","url":"https://dealroom.so/sba-7a/questions/under-what-specific-conditions-does-the-sba-impose-a-prepayment-penalty-on-7-a-loans"},{"question":"How does the upfront 7(a) guaranty fee calculation differ for loans under $500,000 versus those over $1,000,000 for FY2026?","url":"https://dealroom.so/for-lenders/questions/how-does-the-upfront-7-a-guaranty-fee-calculation-differ-for-loans-under-500-000-versus-th"},{"question":"Can I get a very small loan, like under $50,000, with SBA 7(a)?","url":"https://dealroom.so/sba-loans/basics/can-i-get-a-very-small-loan-like-under-50-000-with-sba-7-a"},{"question":"What specific financial metrics are evaluated under 'prudent lending standards' for 7(a) loan approval?","url":"https://dealroom.so/for-lenders/questions/what-specific-financial-metrics-are-evaluated-under-prudent-lending-standards-for-7-a-loan"},{"question":"Can an SBA 7(a) loan be used to buy a commercial building currently under construction?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-be-used-to-buy-a-commercial-building-currently-under-construction"}]},"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 loan","url":"https://dealroom.so/glossary/under-collateralized-loan","source_type":"DealRoom Data"}}