For SBA lenders
Short answer
Lender errors that typically result in a 'repair' of the 7(a) guaranty during liquidation include failure to properly collateralize, not obtaining all required personal guaranties, inadequate servicing, or not adhering to prudent lending standards. A repair means the SBA reduces the guaranteed portion due to the lender's non-compliance.
A repair to the SBA guaranty occurs when the SBA identifies non-compliance by the lender that impacts its ability to recover on the loan but does not warrant a full denial of the guaranty. Common errors involve collateral deficiencies (e.g., unperfected liens), missing personal guaranties, or a lack of documentation demonstrating prudent servicing actions.
A lender submits a guaranty purchase request for a defaulted 7(a) loan. The SBA discovers the lender failed to perfect the lien on a significant piece of equipment. Instead of a full denial, the SBA repairs the guaranty, reducing the purchase amount by the value of the unperfected collateral, as it was a lender error that contributed to the loss.
Insider move
Lenders aim to avoid repairs by ensuring full compliance with all SBA lending and servicing requirements. Repairs reduce the amount the lender recovers from the SBA, directly impacting the lender's profitability and potentially affecting its PLP status.
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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