For SBA lenders
Short answer
The SBA verifies liquidation expenses by requiring detailed documentation, such as invoices, receipts, and proof of payment, submitted with the UPP, to ensure they are reasonable, necessary, and eligible for reimbursement.
Lenders are generally reimbursed for reasonable and necessary liquidation expenses from the proceeds of the collateral before distribution, or as part of the guaranty purchase. However, the SBA scrutinizes these expenses, requiring full documentation to confirm their legitimacy and adherence to SBA guidelines.
A lender submits legal fees for a foreclosure as part of their UPP expenses. The SBA would require itemized invoices from the law firm, clearly detailing the services rendered and confirming they relate directly to the liquidation of the specific 7(a) loan.
Insider move
Lenders must meticulously track and document all liquidation expenses. Unsubstantiated, unreasonable, or ineligible expenses will be disallowed by the SBA, reducing the amount paid on the guaranty.
Universal Purchase Package (UPP)
Request to Honor SBA 7(a) Loan Guaranty
SOP 50 57 - 7(a) Loan Servicing and Liquidation
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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