Glossary · Doing the deal
Collateral shortfall
In short
When the business's assets are worth less than the loan. Allowed on 7(a) loans — the lender may take a lien on other assets you own.
What it means in a deal
Most small businesses don't have enough tangible assets to fully secure the loan amount — the value is in the goodwill, which can't be sold separately. The SBA allows this collateral shortfall, but the lender may take a lien on other assets you personally own, including your home. This is different from the personal guarantee — it's a specific lien on property, not just a promise to pay. Ask your lender early what additional collateral they'll require so there are no surprises at closing.
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 2026-06-16. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Collateral shortfall
- When is personal real estate required as additional collateral for a 7(a) loan with a business asset shortfall?
- 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?
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 2026-06-16 · 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.
Line up financing while you're under LOI
Tell us the business, the price, and your timeline — we'll match you with lenders who close deals like yours and flag anything that stalls the process.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.