For SBA lenders
Short answer
If a lender error caused the default of a sold guaranteed portion, the SBA may repair or deny the guaranty purchase claim, requiring the lender to bear a portion or all of the loss.
When a lender sells the guaranteed portion of a loan, they remain responsible for servicing and liquidating the loan prudently and in accordance with SBA regulations. If a loan defaults due to the lender's failure to adhere to these requirements, the SBA can impose a repair or denial of the guaranty, essentially shifting the loss back to the lender.
A lender sells the guaranteed portion of a $1.5M 7(a) loan. The loan defaults, and during UPP review, the SBA discovers the lender failed to properly perfect a lien on key business equipment at closing. The SBA determines this lender error contributed to the loss. Consequently, the SBA repairs the guaranty, reducing the amount paid to the lender by 25% of the guaranteed portion.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 56 - Lender Participation Requirements
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Universal Purchase Package (UPP)
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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