SBA SOP 50 10 8.1, App19.B.1 — Standard 7(a) Loans

SOP 50 10 8.1 App19.B.1

Effective 2026-10-01 · publisher's stamp for this provision

1. Standard 7(a) Loans a. All General Requirements in this Appendix apply to Standard 7(a) Loans. In addition, the following collateral rules are unique to Standard 7(a) Loans: b. The loan must be fully secured c. SBA considers a loan as “fully secured” if the Lender has taken security interests in all available fixed assets of the Applicant with a combined Net Book Value as adjusted below, up to the loan amount. For 7(a) loans, the term “fixed assets” means real estate, including land and structures, machinery and equipment owned by the business or an EPC. Requirements for liens on vehicles are included in the General Requirements of this Appendix. a) New machinery and equipment (excluding furniture and fixtures) may be valued at no more than 75% of price minus any prior liens for the calculation of “fully secured”; b) Used or existing machinery and equipment (excluding furniture & fixtures) may be valued at no more than 50% of Net Book Value or 80% with an Orderly Liquidation Appraisal minus any prior liens for the calculation of “fully secured”; c) Improved real estate can be valued at no more than 85% and unimproved real estate can be valued at 50% of the market value for the calculation of “fully secured” and the value must be determined in accordance with the requirements set forth in the General Requirements of this Appendix; and d) Furniture and Fixtures may be valued at no more than 10% of Net Book Value or appraised value. d. SBA leaves it up to the discretion of the Lender to decide whether to take a security interest in trading assets (e.g., accounts receivable or inventory) or to leave those assets available to pledge as collateral for a line of credit. If the Lender decides to take a security interest in trading assets, no more than 10% of current book value may be used for the calculation of fully secured. e. Collateral shortfall. If there is a collateral shortfall (not “fully secured”) on the loan the Lender: i. Must take available equity in personal real estate subject to requirements in paragraph A., 1., e. in this Appendix. f. Assets financed. When loan proceeds are used to acquire, refinance, or improve assets, the Lender must obtain a first lien on those assets, subject to the following exception: When loan proceeds will be used to improve assets, a subordinate position is acceptable for the loan if the existing debt is ineligible to be refinanced with a 7(a) loan, or if there is existing debt on reasonable terms (e.g. if the Borrower has an existing loan for the purchase of a building and is getting a new 7(a) loan for improvements), in which case the Lender must document this fact in its credit memorandum. g. Assets held by an owner and spouse. h. When an individual alone or together with a spouse or minor children owns 20% or more of the Applicant, the Lender must consider taking as collateral liens on personal real estate (including commercial and investment properties not occupied by the Applicant) that is owned individually or jointly with that spouse or minor children. i. Real estate transferred by an Applicant owner to a non-owning spouse or minor children within 6 months of application are not exempt from collateral consideration.

Source: SBA SOP 50 10 8.1, App19.B.1 — Standard 7(a) Loans · source URL · snapshot 0fb0c4692cf52938