For SBA lenders
Short answer
The initial liquidation plan must include a detailed strategy for collateral recovery, estimated liquidation costs, proposed actions for debt collection from guarantors, and a timeline for these activities.
Once a 7(a) loan defaults, the lender is responsible for timely and aggressive liquidation. The initial liquidation plan serves as a roadmap, demonstrating to the SBA that the lender has a comprehensive strategy to minimize loss, comply with prudent lending practices, and protect the SBA's interest.
Following a loan default, a lender submits a liquidation plan outlining the intent to conduct a UCC sale of business assets, pursue collection from the personal guarantors, including foreclosing on a real estate lien, and providing a 6-month timeline for initial actions.
Insider move
Lenders must ensure their liquidation plans are thorough, realistic, and align with SBA requirements. Inadequate plans or delays in submission can lead to SBA denying or repairing the guaranty purchase request.
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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