For SBA lenders
Short answer
The SBA often denies guaranty purchase requests due to uncorrected eligibility issues, failure to adhere to prudent lending standards, lack of proper collateral perfection, or insufficient liquidation efforts by the lender.
The SBA may deny a guaranty purchase if the lender failed to originate, disburse, service, or liquidate the loan in a prudent manner or in accordance with SBA regulations. Common reasons include borrower ineligibility at the time of approval, material misrepresentations, inadequate collateral documentation, failure to obtain required personal guaranties, or a lack of documentation demonstrating diligent loss mitigation during liquidation.
A lender submits a UPP for a defaulted $800,000 loan. The SBA discovers the borrower was ineligible at loan closing due to a prior felony conviction not disclosed on Form 1919 and not identified by the lender. This would lead to a guaranty denial.
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)
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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