For SBA lenders
Short answer
To mitigate a repair, the lender must demonstrate that all available collateral was taken at origination, that the collateral was prudently valued, and that diligent liquidation efforts were made to maximize recovery.
If a loan defaults and a collateral deficiency is identified during guaranty purchase review, the SBA may 'repair' the guaranty by reducing its payout. To mitigate, the lender must provide evidence that it followed prudent lending standards at origination regarding collateral valuation and perfection. Additionally, the lender must show robust and timely liquidation efforts, including appraisals, marketing, and sale of collateral, to minimize losses. If the deficiency resulted from an act of God, that may also be a mitigating factor.
A 7(a) loan defaults, and the collateral value is less than expected. The lender provides the SBA with copies of the origination appraisal, proof of blanket UCC filings, and detailed logs of marketing efforts for the assets, demonstrating diligent efforts to secure and liquidate the collateral.
Insider move
Inadequate collateral can expose the lender to significant repair. Thorough documentation of collateral valuation, perfection, and diligent liquidation efforts is crucial to defend against repairs and maximize guaranty recovery.
SOP 50 57 - 7(a) Loan Servicing and Liquidation
Universal Purchase Package (UPP)
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 repairs & denials
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day