For SBA lenders
Short answer
For loans under $500,000, a lender is required to take a lien on available personal real estate if the business assets are insufficient to fully secure the loan AND the equity in the personal real estate is significant (typically 25% or more of its fair market value), and it is not the borrower's primary residence.
SBA requires that all loans be collateralized to the maximum extent possible. For loans under $500,000, a lender generally takes a first lien on all available business assets. If business assets are insufficient, and there is available equity in personal real estate (excluding the primary residence unless specific conditions are met and the borrower voluntarily offers it), the lender must take a lien on it. The policy emphasizes ensuring adequate collateral coverage.
A loan for $250,000 is primarily for working capital. The business assets (equipment, AR, inventory) are valued at $100,000. The borrower owns an unencumbered investment property valued at $300,000. The lender is required to take a lien on this investment property to secure the shortfall.
Insider move
The lender's concern is ensuring the loan is adequately secured. Failure to take available collateral, especially when business assets are insufficient, is a common reason for guaranty repair or denial during the guaranty purchase process.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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