For SBA lenders
Short answer
A "material misrepresentation" is a false statement or omission of fact by the borrower, known to be false, that significantly influences the lender's credit decision or the SBA's eligibility determination.
The SBA's guaranty is contingent on the borrower's truthful and complete disclosure of all relevant information. If a borrower intentionally provides false information (e.g., fraudulent financial statements, undisclosed criminal history, or misstated equity injection source), and this information was material to the loan approval, the SBA will deny the guaranty.
A borrower submits fraudulent tax returns to inflate their income and secure a larger loan. The lender relies on these, but the SBA discovers the fraud during a guaranty purchase review. This material misrepresentation will lead to an outright denial of the guaranty.
Insider move
While lenders perform due diligence, they are also reliant on borrower integrity. However, lenders must document their efforts to verify information, as a failure to detect obvious misrepresentation could also lead to a lender's default.
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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