For SBA lenders
Short answer
Common underwriting errors leading to guaranty repair include inadequate equity injection, failure to obtain proper collateral or guaranties, misrepresenting eligibility, or failure to adhere to prudent lending standards.
SBA may repair or deny a guaranty if the lender did not follow SBA's regulations or prudent lending standards. This often includes insufficient verification of equity injection, failure to secure all required collateral (e.g., personal real estate when available), missing personal guaranties from 20%+ owners, or approving loans to ineligible businesses/individuals. These errors indicate a failure of due diligence.
A lender requests guaranty purchase for a defaulted loan. During review, SBA finds the borrower's equity injection was sourced from an undocumented loan, and a 25% owner was not required to provide a personal guaranty. These omissions would likely lead to a guaranty repair.
Insider move
Lenders must apply robust underwriting practices and meticulously document every aspect of the loan. Proactive internal audits and adherence to checklists can help prevent these errors, which expose the lender to a portion or all of the loss.
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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