For SBA lenders
Short answer
To prove 'commercially reasonable' disposition, lenders must provide documentation including appraisals, marketing efforts, bids received, advertising copies, sale agreements, and invoices for disposition costs.
The SBA requires lenders to liquidate collateral in a commercially reasonable manner, maximizing recovery for the lowest cost. Documentation must demonstrate that the lender acted prudently, transparently, and followed standard commercial practices in marketing and selling the collateral. This includes evidence of seeking multiple bids, advertising, and obtaining fair market value.
A lender liquidates a defaulted 7(a) loan, selling business equipment. They must submit the equipment appraisal, copies of advertisements placed, records of inquiries and tours, at least two bona fide bids, the final bill of sale, and receipts for auctioneer fees and storage, all demonstrating commercially reasonable efforts.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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.
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