For SBA lenders
Short answer
Yes, an existing life insurance policy can be assigned to the lender to satisfy the 7(a) loan requirement, provided it meets SBA's specific terms and conditions.
The policy must be sufficient in amount, term, and type (e.g., term or whole life) to cover the loan exposure. The lender must be named as the assignee, and the assignment must be properly recorded with the insurance company. The policy cannot have any provisions that would impair the lender's ability to collect in the event of the insured's death.
A borrower has a $1 million term life policy. The lender requires an assignment of the policy for the amount of the $500,000 SBA loan. The borrower executes the assignment of policy form, which the lender then sends to the insurance carrier for acknowledgment and recording.
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.
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