Glossary · Doing the deal
Commercially reasonable
In short
This standard means an action or transaction must be fair and typical within the relevant industry, based on prevailing business practices. It ensures terms aren't designed to disadvantage any party.
What it means in a deal
The SBA requires all aspects of a loan transaction, from asset valuations to seller note terms, to be commercially reasonable. This protects the integrity of the loan and ensures the deal reflects market value. Your due diligence should verify that all terms align with industry standards and market conditions.
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 Commercially reasonable
- What constitutes "commercially reasonable" efforts by a lender in liquidating collateral for a defaulted 7(a) loan?
- What specific documentation is required for a lender to prove 'commercially reasonable' disposition of collateral during 7(a) loan liquidation?
- When a lender is liquidating collateral for a 7(a) loan, what are the specific requirements for proving "commercially reasonable" disposition?
- How does the SBA ensure the valuation of goodwill is reasonable for an acquisition loan?
- How does the SBA determine if the purchase price for a business acquisition is reasonable?
- How does the SBA ensure the purchase price allocation to goodwill is reasonable for an acquisition?
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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