Glossary · The loan itself
Collateral gap
In short
This occurs when the liquidation value of the business assets is less than the loan amount. The SBA requires lenders to seek additional collateral to cover this shortfall.
What it means in a deal
Lenders perform a collateral analysis to determine the liquidation value of the business assets. If this value is insufficient to cover the loan, you have a collateral gap. The SBA requires lenders to take available equity from personal real estate or other assets to fill this gap. Be ready to offer up personal assets or negotiate a deal restructuring if the gap is too large.
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 gap
- 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?
- What happens if my business does not have enough collateral?
- Can my business's accounts receivable be used as collateral?
- Is collateral always required for an SBA 7(a) loan?
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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