Glossary · The loan itself
In short
The SBA's mandate that borrowers with an ownership stake of 20% or more obtain life insurance to cover the outstanding loan balance. This protects the lender if a key principal dies.
If you're a Key Principal with 20% or more ownership, the SBA requires you to obtain life insurance, with the lender as the beneficiary. The policy must cover at least the SBA portion of the loan or your pro-rata share. This is a condition precedent to closing and must be assigned to the lender.
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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