For SBA lenders
Short answer
Commercially reasonable efforts involve maximizing recovery on collateral through methods like public or private sales, ensuring adequate advertising, and obtaining fair market value, acting as a prudent lender would without an SBA guaranty.
SOP 50 57 requires lenders to use commercially reasonable efforts when liquidating collateral, which means acting in good faith and with due diligence to maximize the net recovery. This includes selecting appropriate sales methods, conducting proper advertising, and obtaining independent valuations to ensure the realized price is fair.
For a defaulted loan with equipment collateral, the lender obtains an appraisal, advertises the equipment for sale through multiple channels, and conducts a public auction, ensuring competitive bidding to achieve the best possible recovery.
Insider move
Lenders must meticulously document all liquidation efforts, appraisals, and sales processes. Failure to demonstrate commercially reasonable actions is a common reason for guaranty repairs or denials during guaranty purchase.
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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