For SBA lenders
Short answer
No, a lender cannot include unapproved legal fees in a Universal Purchase Package (UPP); extraordinary legal fees require prior SBA approval to be reimbursed.
Legal fees incurred during liquidation are generally considered liquidation expenses. While routine, reasonable legal expenses typically fall within a lender's delegated authority, extraordinary legal fees (e.g., those exceeding a certain percentage of the loan balance or a fixed dollar amount) require prior written SBA approval. If approval was not obtained for extraordinary fees, the SBA will likely disallow those costs from reimbursement in the UPP.
During liquidation of a 7(a) loan, the lender incurs $80,000 in legal fees due to complex litigation. If the lender's delegated authority for legal fees is $25,000 and they failed to obtain prior SBA approval for the additional $55,000, the SBA would likely only reimburse the $25,000, reducing the lender's recovery in the UPP.
Insider move
Lenders must strictly adhere to SBA guidelines regarding liquidation expense approval. Including unapproved extraordinary legal fees can reduce the amount reimbursed by the SBA, directly impacting the lender's financial recovery from a defaulted loan.
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Universal Purchase Package (UPP)
Request to Honor SBA 7(a) Loan Guaranty
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.
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