For SBA lenders
Short answer
To justify liquidation expenses in the UPP, a lender must provide itemized invoices, proof of payment, and detailed explanations for each expense. This includes legal fees, appraisal costs, environmental costs, and collateral recovery expenses.
The SBA scrutinizes liquidation expenses to ensure they are reasonable, necessary, and documented. For each expense category, lenders must provide clear, concise documentation, such as third-party invoices, canceled checks, or bank statements, and explain how the expense contributed to the successful liquidation or loss mitigation. Unjustified or poorly documented expenses may be disallowed from the guaranty purchase claim.
A lender includes $10,000 in legal fees in their UPP. To justify this, they provide detailed attorney invoices showing hourly rates and specific services performed (e.g., preparing for foreclosure, negotiating with borrower), along with proof of payment, demonstrating the necessity and reasonableness of the expense.
Insider move
Lenders must be meticulous in documenting and justifying all liquidation expenses. A significant portion of guaranty repairs stem from inadequate documentation of these costs, leading to reduced recovery from the SBA.
Universal Purchase Package (UPP)
SOP 50 57 - 7(a) Loan Servicing and Liquidation
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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