For SBA lenders
Short answer
Yes, an existing life insurance policy can be assigned to the lender, provided it meets SBA requirements for coverage amount, policy type, and the assignment is properly documented and recorded.
Lenders may accept an assignment of an existing policy rather than requiring a new one, as long as the policy is acceptable (e.g., term or whole life, not decreasing term that expires before the loan). The assignment must be irrevocable and grant the lender the right to receive proceeds up to the loan balance, with proper notification to the insurance carrier.
A key principal has an existing $1,000,000 whole life policy. The lender requires an executed assignment of policy to be filed with the insurance company, naming the lender as assignee, to meet the SBA's life insurance requirement for a $750,000 loan.
Insider move
Lenders must verify the existing policy's terms (e.g., coverage, beneficiaries, term) and ensure the assignment is legally effective and recorded, preventing issues with collecting proceeds in case of the 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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