Glossary · Doing the deal
Collateral recovery
In short
This is the process where a lender seizes and sells collateral to recoup losses when a borrower defaults on a loan. It's the last resort for the lender.
What it means in a deal
If an SBA 7(a) loan defaults, the lender will attempt to recover funds from the business's pledged collateral, like equipment or real estate. Any shortfall after recovery can trigger the personal guarantee. Understand what assets are pledged and their liquidation value.
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 recovery
- How does a lender comply with SBA requirements for maximizing recovery on collateral during liquidation?
- What minimum efforts must a lender demonstrate in collection and recovery before submitting a liquidation plan to the SBA?
- 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?
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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