{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-the-borrower-s-business-entity-be-named-as-the-beneficiary-for-sba-mandated-life-insur","api_url":"https://dealroom.so/api/public/questions/can-the-borrower-s-business-entity-be-named-as-the-beneficiary-for-sba-mandated-life-insur","question":"Can the borrower's business entity be named as the beneficiary for SBA-mandated life insurance, instead of the lender?","topic":"Life insurance","audience":"lender","bot_mode":"lender","short_answer":"No, the business entity itself cannot be the sole beneficiary for SBA-mandated life insurance. The lender must be named as the primary beneficiary or receive a collateral assignment of the policy.","rule":"The purpose of SBA-mandated life insurance is to protect the lender (and thus the SBA guaranty) in the event of a key principal's death. If the business were the sole beneficiary, the proceeds might be used for purposes other than loan repayment or could be subject to other creditors, undermining the loan's security.","example":"A borrower proposes to name their S-Corp as the beneficiary for the required life insurance policy. The lender must inform the borrower that the lender must be the primary beneficiary or receive a collateral assignment to comply with SBA requirements.","what_lenders_check":"Lenders must ensure proper beneficiary designation or collateral assignment to directly receive life insurance proceeds, safeguarding the loan and the SBA guaranty in the event of a key principal's death.","required_facts":["Life insurance","Business beneficiary","Lender beneficiary","Collateral assignment","Loan protection"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"When can a lender require a collateral assignment of life insurance for a 7(a) loan on a non-owner key employee?","url":"https://dealroom.so/for-lenders/questions/when-can-a-lender-require-a-collateral-assignment-of-life-insurance-for-a-7-a-loan-on-a-no"},{"question":"What documentation is required for a lender to properly assign a life insurance policy as collateral for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-documentation-is-required-for-a-lender-to-properly-assign-a-life-insurance-policy-as-"},{"question":"What specific details must a lender verify when structuring life insurance collateral assignments for multiple key principals with varying ownership stakes?","url":"https://dealroom.so/for-lenders/questions/what-specific-details-must-a-lender-verify-when-structuring-life-insurance-collateral-assi"},{"question":"When is a collateral assignment of life insurance on a key principal mandatory for an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/when-is-a-collateral-assignment-of-life-insurance-on-a-key-principal-mandatory-for-an-sba-"},{"question":"Under what circumstances can a lender waive the life insurance requirement for a 7(a) loan on a key principal?","url":"https://dealroom.so/for-lenders/questions/under-what-circumstances-can-a-lender-waive-the-life-insurance-requirement-for-a-7-a-loan-"},{"question":"What are the specific requirements for life insurance collateral assignment when multiple key principals exist?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-life-insurance-collateral-assignment-when-multiple-"}],"related_terms":[{"term":"SBA-Mandated Life Insurance","url":"https://dealroom.so/glossary/sba-mandated-life-insurance"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"For-profit entity","url":"https://dealroom.so/glossary/for-profit-entity"},{"term":"Business Entity","url":"https://dealroom.so/glossary/business-entity"},{"term":"Beneficiary","url":"https://dealroom.so/glossary/beneficiary"},{"term":"Universal life insurance","url":"https://dealroom.so/glossary/universal-life-insurance"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/can-the-borrower-s-business-entity-be-named-as-the-beneficiary-for-sba-mandated-life-insur","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}