For SBA lenders
Short answer
Material non-compliance includes violations of eligibility rules, failure to obtain required collateral, improper equity injection verification, or significant deviations from prudent lending standards that directly contribute to the loan's loss.
The SBA may repair or deny its guaranty if the lender failed to originate, disburse, service, or liquidate the loan in accordance with SBA regulations and prudent lending practices, and this failure results in an increased loss. Material non-compliance is a significant deviation from these requirements.
A lender fails to obtain a required personal guaranty from a 25% owner, a clear eligibility violation. When the loan defaults, the SBA would likely issue a repair or denial, as this omission significantly impacts potential recovery.
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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