For SBA lenders
Short answer
Common underwriting errors include misrepresenting eligibility, inadequate equity injection, insufficient collateralization, unverified financial projections, and failure to properly analyze affiliation.
A guaranty repair typically occurs when the SBA determines that a lender did not adhere to all eligibility, underwriting, or closing requirements but the default was not directly caused by the error. Examples include miscalculating the business size, failing to properly document equity, or not taking required collateral. The lender must absorb a portion of the loss.
A lender approved a 7(a) loan where the borrower's equity injection was not fully documented or verified. Upon default, the SBA finds this underwriting error and, while honoring the guaranty, repairs it by reducing the guaranteed percentage, making the lender responsible for a larger share of the loss.
Insider move
Strict adherence to SBA lending policies and prudent underwriting standards is paramount. Lenders must have robust internal controls and training to minimize errors that could result in a guaranty repair or denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SOP 50 57 - 7(a) Loan Servicing and Liquidation
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.
More on repairs & denials
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