For SBA lenders
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.
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.
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.
Insider move
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.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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.
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