For SBA lenders
Short answer
Immediately post-default, a lender must notify the SBA, conduct a site visit, perform a collateral analysis, evaluate recovery options, and begin collection activities diligently, following prudent lending practices.
Upon default, the lender is responsible for promptly protecting the government's interest. This includes timely notification to the SBA, assessing the borrower's situation, valuing collateral, exploring workout options, and initiating collection efforts. The lender must act as if the loan were not guaranteed, ensuring maximum recovery.
A $500,000 7(a) loan defaults. The lender sends a default notice to the SBA, dispatches a field agent for a site visit and inventory check, orders an appraisal of the real estate, and initiates contact with the borrower to discuss repayment or asset disposition.
Insider move
Timeliness and diligence are paramount during liquidation. Delays in notification, failure to protect collateral, or inadequate collection efforts can result in a repair or denial of the SBA guaranty.
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 2026-06-13. 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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