For SBA lenders
Short answer
For a debt compromise offer, the lender must submit a comprehensive written request to the SBA, including the borrower's financial information, an analysis of the offer versus potential recovery, and the lender's recommendation.
When a borrower in liquidation offers to settle their debt for less than the full amount, the lender must seek SBA approval if the compromise significantly impacts the guaranteed portion. The SBA reviews the proposal to ensure it represents the maximum prudent recovery for the government, considering collection costs and other factors.
A borrower with a $500,000 outstanding SBA loan offers to settle for $150,000, claiming financial hardship. The lender must compile the borrower's current financial statements, a liquidation analysis showing expected recovery from collateral and guarantors, and a detailed justification for accepting the $150,000 offer compared to pursuing full collection, then submit it to SBA.
Insider move
Lenders must conduct thorough due diligence on the borrower's financial condition to justify the compromise. The SBA expects a robust analysis demonstrating that the offer is the best available recovery option. Failure to adequately document and justify the compromise can result in SBA refusing to honor the guaranty for the shortfall.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
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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