For SBA lenders
Short answer
Lenders must demonstrate that they have exhausted all reasonable informal collection efforts and prudent workout options before submitting a formal liquidation plan to the SBA.
SBA expects lenders to act as a prudent lender would for its own portfolio. This includes diligent efforts to cure the default, explore workout options (e.g., deferments, modifications), and initiate timely formal collection actions, such as sending demand letters and attempting to secure voluntary collateral. These efforts must be thoroughly documented.
Before submitting a liquidation plan, a lender must provide evidence of multiple attempts to contact the borrower, records of demand letters, a documented analysis of workout proposals (if any), and attempts to secure voluntary surrender of collateral. If collateral exists, steps to preserve its value must also be shown.
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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