SBA loan basics
Short answer
Collateral refers to assets pledged by the borrower to secure the loan. If the borrower defaults, the lender can seize and sell these assets to recover their money.
For SBA 7(a) loans, collateral typically includes business assets like accounts receivable, inventory, machinery, equipment, and real estate. If business assets are insufficient, personal assets (like real estate) may also be required. Collateral provides a secondary source of repayment to the lender, reducing their risk and providing security for the loan.
A manufacturing business takes out an SBA loan to buy new machinery. The machinery itself, along with the business's existing inventory and accounts receivable, would be pledged as collateral for the loan.
Lenders appraise and verify the value of all pledged collateral to ensure adequate coverage. They also ensure their lien position is properly secured to allow for efficient recovery in case of default.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. 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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