For SBA lenders
Short answer
A liquidation plan must include an analysis of the borrower's financial condition, proposed actions for collateral recovery, guarantor collection strategy, estimated recovery amounts, and a timeline for actions.
When a 7(a) loan defaults and the lender plans for liquidation, a comprehensive liquidation plan must be submitted to the SBA for approval, particularly for larger loans or complex situations. This plan details the loan status, borrower's financial information, a detailed strategy for foreclosing on or selling collateral, pursuing personal and corporate guarantors, estimated recovery proceeds, projected liquidation expenses, and a clear timeline for all proposed actions.
A lender submits a liquidation plan for a defaulted $1 million loan. The plan includes the borrower's most recent financials, an appraisal of the real estate, a plan to sell the equipment via auction, a legal strategy to pursue two personal guarantors, an estimate of $300,000 net recovery, and a 12-month timeline.
Insider move
Lenders prioritize creating robust and realistic liquidation plans. They focus on accurate financial analysis, clear action steps, and reasonable recovery estimates to gain SBA approval and maximize the chances of a successful guaranty purchase.
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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