For SBA lenders
Short answer
Generally, no, the SBA requires the lender to take a first lien position on all available business assets financed by the loan and any other available collateral, unless specific exceptions apply and the collateral is otherwise fully secured.
The SBA's policy is to ensure maximum recovery in case of default, which necessitates taking a first lien position on business assets. Accepting a junior lien on non-real estate business assets would typically require a compelling justification and demonstrate that the total collateral secures the loan sufficiently with the first lien position taking precedence on other collateral.
A borrower has an existing line of credit secured by a first lien on their accounts receivable and inventory. The lender for a new 7(a) term loan cannot typically take a junior lien on these same assets unless the first lien is fully repaid or subordinated, or other first-lien collateral completely secures the 7(a) loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on collateral & lien requirements
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