Glossary · The loan itself
In short
The SBA requires life insurance on key principals for most 7(a) loans to protect the lender in case of the borrower's death, ensuring the loan can still be repaid.
For an SBA 7(a) loan, if a key principal's death would jeopardize the business's ability to repay the loan, the lender must require life insurance. The policy amount typically covers the outstanding loan balance, with the lender assigned as the beneficiary. Factor the cost of premiums into your cash flow projections.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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