Glossary · Doing the deal
Collateral Disposition Expense
In short
The costs associated with selling or otherwise disposing of collateral after a loan default. These expenses reduce the net proceeds applied to the outstanding loan balance.
What it means in a deal
In a default scenario, the lender will incur costs to appraise, market, and sell collateral. These disposition expenses, like legal fees or broker commissions, come off the top of the sale price. The net amount then reduces your outstanding loan balance, impacting your personal guarantee exposure.
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 Collateral Disposition Expense
- 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?
- How does business overhead expense insurance differ from key-person life insurance?
- 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?
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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