Glossary · Doing the deal
Collateral disposition
In short
The process where a lender sells pledged collateral after a loan default. Proceeds reduce the outstanding balance before the SBA guaranty is called.
What it means in a deal
If an SBA loan defaults, the lender will pursue collateral disposition to minimize their loss before making a guaranty purchase request to the SBA. This involves selling assets like equipment, accounts receivable, or real estate. The proceeds from collateral disposition reduce the outstanding loan balance and thus the amount the SBA might have to pay on its guaranty.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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 Collateral disposition
- What specific documentation is required for a lender to prove 'commercially reasonable' disposition of collateral during 7(a) loan liquidation?
- Can a lender accept a "soft offer" for collateral in liquidation, or is a formal appraisal always required for disposition?
- When a lender is liquidating collateral for a 7(a) loan, what are the specific requirements for proving "commercially reasonable" disposition?
- Can a 7(a) lender release a portion of the collateral without prior SBA approval if the remaining collateral is sufficient?
- When can a 7(a) lender release a portion of the collateral without prior SBA approval if the remaining collateral is sufficient?
- Can cash in the business bank account count as collateral?
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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