For SBA lenders
Short answer
Lenders must obtain prior written approval from the SBA for extraordinary liquidation expenses, typically exceeding a certain percentage of the loan's outstanding balance or a fixed dollar amount.
While lenders have authority for ordinary liquidation expenses, extraordinary expenses, such as significant legal fees, environmental remediation costs, or substantial asset preservation expenses, require prior SBA approval. Lenders must submit a detailed justification, including cost estimates, to the SBA for review and authorization before incurring such costs.
During the liquidation of a defaulted $800,000 7(a) loan, environmental testing on a contaminated property reveals the need for $75,000 in remediation. Since this amount exceeds the lender's delegated authority for liquidation expenses, the lender must submit a request to the SBA, outlining the issue, proposed solution, and cost estimate, before proceeding with the remediation.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Universal Purchase Package (UPP)
Request to Honor SBA 7(a) Loan Guaranty
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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