SBA 7(a) Q&A
Short answer
A material adverse change is a significant negative event or discovery affecting the business's or borrower's financial condition or prospects, occurring after the loan application is submitted.
Lenders review for material adverse changes until closing. This could include a significant drop in business revenue, loss of a major customer, new litigation, a change in the borrower's personal financial situation (e.g., bankruptcy), or discovery of serious environmental issues.
You apply for a $1,000,000 acquisition loan, and two weeks later, the target business loses its largest client, representing 40% of its revenue. This would be a material adverse change, likely leading to the loan's re-evaluation or denial.
Insider move
Lenders are obligated to act prudently. Any material adverse change must be disclosed and re-evaluated to determine its impact on the business's ability to repay the loan and to protect the SBA guarantee.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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