For SBA lenders
Short answer
A workout plan is a structured approach developed by the lender to resolve a defaulted 7(a) loan, aiming to maximize recovery for all parties involved through various strategies such as payment modifications, asset sales, or other viable solutions.
Before proceeding with full liquidation, lenders are expected to develop and implement a prudent workout plan for defaulted 7(a) loans. This plan outlines specific actions, timelines, and expected outcomes, demonstrating the lender's diligent efforts to mitigate losses, potentially avoiding formal liquidation if successful.
A borrower defaults due to a temporary economic downturn. The lender creates a workout plan proposing a 6-month deferment of principal, followed by modified payments, and requiring the borrower to sell a non-essential asset to inject cash, all documented and monitored.
Insider move
Lenders must demonstrate that the workout plan was prudently conceived and actively pursued. A lack of a clear plan, or failure to execute it diligently, can be viewed as imprudent liquidation by the SBA, leading to a guaranty repair.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Servicing and Liquidation Actions 7(a) Lender Matrix
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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