Glossary · Doing the deal
Assignment of policy
In short
This is when you formally transfer ownership of a life insurance policy to the lender as collateral for your SBA loan. It ensures the lender gets paid if something happens to you, the key person.
What it means in a deal
For 7(a) loans, the SBA requires life insurance on key principals if the loan's repayment is dependent on their management. You'll sign an "assignment of policy" form, making the lender the primary beneficiary up to the loan amount. This protects the lender's interest.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Assignment of policy
- Are there specific requirements for the type of life insurance policy needed for a collateral assignment on a key principal?
- Can a term life insurance policy be used for the collateral assignment requirement on an SBA 7(a) loan?
- What are the specific requirements for naming the lender as the loss payee on a life insurance policy collateral assignment?
- Can a term life insurance policy be used for the required collateral assignment on key principals for a 7(a) loan?
- Can a lender rely on a universal life insurance policy that has a cash value for a collateral assignment on a 7(a) loan?
- How does a collateral assignment of life insurance protect a lender?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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