For SBA lenders
Short answer
The lender must be named as the sole beneficiary for life insurance required as a condition of a 7(a) loan, for an amount sufficient to cover the outstanding balance.
When life insurance is required, it serves as collateral to mitigate the risk of a key person's death impacting loan repayment. Naming the lender as beneficiary ensures that the loan can be repaid from the policy proceeds, protecting the lender and the SBA guaranty.
A $400,000 loan requires life insurance on the CEO. The lender ensures the policy names 'ABC Bank, as its interest may appear' as the sole beneficiary for at least $400,000, and receives an assignment of policy form.
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.
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