SBA loan basics
Short answer
If business assets don't fully cover the loan, the SBA often requires available personal assets, like a home, as additional collateral, to the extent equity exists.
The SBA requires lenders to take all available business assets as collateral. If there's a collateral shortfall, the lender must take available equity in personal real estate of the principals (owners of 20% or more) as additional collateral, up to the amount of the shortfall, provided it doesn't leave the borrower without a primary residence.
A business needs a $400,000 loan, but only has $100,000 in business assets. The owner has $150,000 in equity in their primary home. The lender would take a lien on the home to cover the $150,000, leaving a remaining collateral shortfall for the SBA to accept.
Lenders are required to make a diligent effort to collateralize the loan to the maximum extent possible. They must properly value all assets and document any collateral shortfalls, clearly stating why additional collateral isn't being taken.
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 2026-06-14. 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.
More on collateral requirements
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