{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-constitutes-a-material-adverse-change-that-could-affect-my-loan-approval-after-applic","api_url":"https://dealroom.so/api/public/questions/what-constitutes-a-material-adverse-change-that-could-affect-my-loan-approval-after-applic","question":"What constitutes a 'material adverse change' that could affect my loan approval after application?","topic":"What kills approval","audience":"borrower","bot_mode":"buyer","short_answer":"A material adverse change is a significant negative event or discovery affecting the business's or borrower's financial condition or prospects, occurring after the loan application is submitted.","rule":"Lenders review for material adverse changes until closing. This could include a significant drop in business revenue, loss of a major customer, new litigation, a change in the borrower's personal financial situation (e.g., bankruptcy), or discovery of serious environmental issues.","example":"You apply for a $1,000,000 acquisition loan, and two weeks later, the target business loses its largest client, representing 40% of its revenue. This would be a material adverse change, likely leading to the loan's re-evaluation or denial.","what_lenders_check":"Lenders are obligated to act prudently. Any material adverse change must be disclosed and re-evaluated to determine its impact on the business's ability to repay the loan and to protect the SBA guarantee.","required_facts":["Material adverse change","Business financials","Borrower situation","Risk re-evaluation","Loan approval"],"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":"What if the business I'm acquiring has poor historical cash flow or declining revenues for the last two years?","url":"https://dealroom.so/sba-7a/questions/what-if-the-business-i-m-acquiring-has-poor-historical-cash-flow-or-declining-revenues-for"},{"question":"Can a high customer concentration (e.g., one customer is 50% of revenue) jeopardize my SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/can-a-high-customer-concentration-e-g-one-customer-is-50-of-revenue-jeopardize-my-sba-7-a-"},{"question":"What common issues can cause an SBA 7(a) loan application to be denied?","url":"https://dealroom.so/sba-7a/questions/what-common-issues-can-cause-an-sba-7-a-loan-application-to-be-denied"},{"question":"Can an SBA 7(a) loan be used to purchase a business that is currently unprofitable?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-purchase-a-business-that-is-currently-unprofitable"},{"question":"What happens if the acquired business declines significantly during the loan underwriting period?","url":"https://dealroom.so/sba-7a/questions/what-happens-if-the-acquired-business-declines-significantly-during-the-loan-underwriting-"},{"question":"What if the business I'm buying has existing tax liens or other government debts?","url":"https://dealroom.so/sba-7a/questions/what-if-the-business-i-m-buying-has-existing-tax-liens-or-other-government-debts"}],"related_terms":[{"term":"Material adverse change","url":"https://dealroom.so/glossary/material-adverse-change"},{"term":"Material Change","url":"https://dealroom.so/glossary/material-change"},{"term":"Loan Application","url":"https://dealroom.so/glossary/loan-application"},{"term":"Loan Application Package","url":"https://dealroom.so/glossary/loan-application-package"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"Change-of-ownership loan","url":"https://dealroom.so/glossary/change-of-ownership-loan"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-constitutes-a-material-adverse-change-that-could-affect-my-loan-approval-after-applic","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."]}