For SBA lenders
Short answer
'Material non-compliance' includes deviations from SBA loan program requirements or prudent lending standards that significantly increase the risk of loss to the SBA. Examples are misrepresenting eligibility, not verifying equity, or failing to secure collateral.
Material non-compliance refers to actions or omissions by the lender that are fundamental to the SBA's loan program requirements or basic lending principles. Examples include: failing to confirm borrower eligibility, not verifying the source and use of equity injection, failure to take required collateral or perfect liens, not obtaining necessary personal guaranties, or making false statements in the application. These issues directly impact the SBA's risk exposure and can lead to a guaranty repair, reducing the amount the SBA pays on a defaulted loan.
A lender submits a UPP, and the SBA discovers the lender misrepresented the borrower's industry to qualify for a higher loan amount. This would be material non-compliance, leading to a repair of the guaranty or potentially full denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
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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