For SBA lenders
Short answer
Once a 7(a) loan enters liquidation, the lender is responsible for prudent and aggressive collection efforts, including collateral recovery, litigation, and pursuing all available remedies to minimize loss, acting as if there were no SBA guaranty.
Upon default, the lender must follow prudent lending practices in liquidating the loan. This involves promptly assessing the collateral, pursuing all guarantors, conducting a thorough workout analysis, and initiating appropriate collection actions to maximize recovery for both the lender and SBA, adhering to SBA liquidation policies.
A borrower defaults on a 7(a) loan. The lender promptly sends a demand letter, then secures the business assets, conducts an appraisal, and initiates a Uniform Commercial Code (UCC) foreclosure process, while simultaneously pursuing collections from personal guarantors through legal means.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Request to Honor SBA 7(a) Loan Guaranty
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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