For SBA lenders
Short answer
The lender must pursue all available legal and collection remedies against the non-performing personal guarantor with the same diligence as a conventional loan, including judgment and execution on assets, and document all efforts.
Personal guaranties are crucial to SBA loans. If a guarantor defaults, the lender is required to actively pursue collection, including legal action (e.g., suing on the guaranty, obtaining judgment, executing on non-exempt personal assets), to maximize recovery. All efforts must be documented in the liquidation file.
A personal guarantor on a defaulted 7(a) loan refuses to make payments. The lender initiates a lawsuit, obtains a judgment, and then works with an attorney to identify and attach the guarantor's non-exempt assets, such as investment accounts or secondary properties, meticulously documenting each step.
Insider move
Failure to diligently pursue personal guarantors is a common reason for SBA guaranty repair or denial. Lenders must demonstrate they made commercially reasonable efforts to collect from all obligated parties.
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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