For SBA lenders
Short answer
Lenders require an executed collateral assignment form from the insurance carrier, proof of policy ownership by the borrower, and verification that the lender is named as the primary assignee.
To properly assign a life insurance policy as collateral, the lender must obtain a Collateral Assignment of Life Insurance form, executed by the policy owner and acknowledged by the insurance company. This form designates the lender as the primary beneficiary or assignee for the amount of the loan, ensuring that proceeds are paid to the lender in the event of the insured's death, up to the outstanding loan balance.
A borrower provides a $500,000 life insurance policy. The lender would provide a collateral assignment form to the borrower and the insurance company. Once executed, the lender would receive confirmation from the insurance carrier that the assignment has been recorded and that they are the primary assignee for the loan amount.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Standard 7(a) Authorization File Library
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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