For SBA lenders
Short answer
The SBA generally requires a first lien position on all available business assets (and personal real estate when required), though it may accept a second lien if the first lien is for a purchase money obligation with proper subordination.
Lenders must obtain a first lien position on all business assets purchased with loan proceeds and all available business assets of the borrower and guarantors, up to the point of being fully secured. If other lenders are involved, subordination agreements or intercreditor agreements are required to ensure the SBA's lien position is protected. A second lien may be acceptable if the prior lien is a purchase money security interest or if it's on personal real estate where the SBA position is still adequately protected.
A $750,000 7(a) loan is secured by all business assets. The lender ensures their UCC filing is in first position on inventory, equipment, and accounts receivable. For a piece of equipment financed by a separate vendor loan, the SBA lender takes a second lien, provided the vendor's first lien is a purchase money security interest for that specific equipment.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
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.
More on collateral & lien requirements
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