For SBA lenders
Short answer
A lender generally must obtain a first lien on all available business assets. Accepting a junior lien position is rare and typically only allowed for specific circumstances with strong justification and collateral coverage.
The SBA requires the lender to take a first lien on all available business assets to the maximum extent possible. Junior liens are typically only permitted in very limited circumstances, such as when specific assets are already subject to an existing purchase money security interest for the acquisition of that asset, or if the remaining collateral provides sufficient coverage for the SBA loan, and the lender documents the rationale under prudent lending standards.
A business has an existing loan from another bank secured by a first lien on specific specialized equipment. If the SBA 7(a) loan is for working capital and substantial other unencumbered business assets (e.g., A/R, inventory, real estate) are available for a first lien, the lender might accept a second lien on that specific equipment, provided overall collateral coverage is strong.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
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.
More on collateral & lien requirements
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