For SBA lenders
Short answer
Lenders must use commercially reasonable efforts to liquidate collateral, including obtaining current appraisals, marketing assets appropriately, and documenting all collection and sales efforts, adhering to SBA guidelines.
During liquidation, lenders are required to act as a prudent lender would in its own uninsured loans, using commercially reasonable efforts to maximize recovery on all collateral. This involves timely and effective collection actions, proper valuation, and transparent sales processes, all meticulously documented.
A $1.2M 7(a) loan defaults, secured by real estate and equipment. The lender obtains current appraisals for both, markets the real estate through a broker, and disposes of the equipment via auction. All efforts, including marketing materials, bids received, and sale prices, are documented in the liquidation file to demonstrate commercially reasonable efforts to the SBA.
Insider move
Lenders must demonstrate that they pursued all reasonable avenues to recover funds. Failure to employ commercially reasonable efforts, such as inadequate marketing or accepting low offers, can result in a guaranty repair by the SBA for the difference in potential recovery.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Universal Purchase Package (UPP)
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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