For SBA lenders
Short answer
If a lender discovers a material eligibility issue post-closing that would have prevented SBA approval, the SBA will likely deny its guaranty purchase request entirely, as the loan was never eligible for the program.
Lenders are responsible for determining and certifying borrower eligibility at the time of application and closing. If, during a servicing action or upon default, the SBA discovers a fundamental eligibility issue (e.g., the business type was ineligible, or a principal had disqualifying criminal history not properly disclosed), the SBA will typically deny the guaranty purchase claim because the loan should have never been guaranteed.
A lender closes a 7(a) loan for a business that, unbeknownst to them, derives over one-third of its gross revenue from passive real estate rentals. If this is discovered during a guaranty purchase request, the SBA would deny the claim, stating the business was ineligible from the outset.
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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