For SBA lenders
Short answer
If accounts receivable from government contracts are collateral, the lender must comply with the Federal Assignment of Claims Act, which requires specific procedures for assigning claims against the U.S. government.
The Federal Assignment of Claims Act (FACA) governs assignments of claims against the U.S. government. For accounts receivable from government contracts to be valid collateral, the assignment must be made to a bank or financial institution, and formal notices of assignment must be provided to the contracting officer, the disbursing officer, and the surety (if any). Failure to comply with FACA renders the assignment unenforceable against the government.
A contractor applying for a 7(a) loan relies on a $500,000 receivable from a Department of Defense contract as collateral. The lender must ensure a valid assignment of claims is executed and notices are properly sent to the contracting officer and the disbursing officer for the Department of Defense, as per FACA.
Insider move
Lenders must understand and strictly adhere to FACA requirements to ensure their lien on government contract receivables is enforceable. Improper assignment can result in the loss of collateral value and potential guaranty repair if the loan defaults.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
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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