SBA 7(a) Q&A
Short answer
A pending major lawsuit against the acquired business can significantly jeopardize or even kill your SBA 7(a) loan approval, as it represents a substantial contingent liability.
Lenders and the SBA are concerned about any legal actions that could materially impact the business's financial stability, cash flow, or assets. A major lawsuit could result in significant legal costs, a large settlement, or judgment, which would directly affect the business's ability to repay the loan. Full disclosure and a clear understanding of the lawsuit's potential impact are essential.
If the business is facing a $500,000 product liability lawsuit, the lender would likely require the lawsuit to be resolved or a strong legal opinion indicating low risk and minimal financial impact before approving the loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SBA Form 1919 - Borrower Information Form
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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