Glossary · The loan itself
In short
This is a loan where the value of the assets pledged as collateral is less than the loan amount. The SBA will still guarantee these loans if the business's cash flow is strong enough to cover debt payments.
Your 7(a) loan might be under-collateralized, especially for service businesses with few tangible assets. The SBA requires lenders to take all available collateral, but the primary repayment source is always the business's cash flow. Don't be surprised if your personal assets are also required as collateral.
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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