For SBA lenders
Short answer
If a secondary market investor defaults, the lender must notify the SBA immediately, take possession of the guaranteed portion, and manage the loan internally or seek another investor.
In the event of a secondary market investor default, the originating lender must notify SBA's Fiscal and Transfer Agent and retrieve the note. The lender then resumes full responsibility for the guaranteed portion, effectively holding both the guaranteed and unguaranteed portions of the loan. The lender may then pursue other options, such as finding a new investor or retaining the guaranteed portion.
A lender sold an $800,000 guaranteed portion of a 7(a) loan, but the investor failed to fund the purchase. The lender promptly contacts the SBA's transfer agent, retrieves the original guaranteed note, and documents the event. The lender then decides to hold the guaranteed portion in its own portfolio while exploring other potential buyers.
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 56 - Lender Participation Requirements
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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