For SBA lenders
Short answer
Generally, yes, a first lien position is required on all available business assets. However, a second lien position may be acceptable if the remaining equity in the asset provides sufficient collateral coverage and the prior lien is a minor encumbrance.
SBA policy generally requires a first lien position on all fixed assets, inventory, and accounts receivable, as well as on any real estate financed with loan proceeds. This ensures the best possible recovery position for the lender and SBA in case of default. Exceptions for a second lien are rare and require justification that the value of the asset still provides adequate collateral coverage for the SBA loan.
A $1 million 7(a) loan is secured by a first lien on all business assets. For a specific piece of equipment with a $20,000 prior lien, the lender may accept a second lien if the equipment's fair market value is $150,000, ensuring ample collateral value remains for the SBA loan.
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.
More on collateral & lien requirements
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