Glossary · Doing the deal
Commercially Reasonable Disposition
In short
This refers to the legal requirement for a lender to sell collateral in a way that maximizes recovery while being fair. As a buyer, this protects you if your business fails and collateral must be sold.
What it means in a deal
If your business defaults and collateral is seized, the lender must sell it in a "commercially reasonable" manner, meaning they can't just dump assets for pennies. They need to make a good faith effort to get a fair price. This is a protection for you, the borrower, ensuring assets aren't wasted if liquidation occurs.
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 Disposition
- 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?
- What constitutes "commercially reasonable" efforts by a lender in liquidating collateral for a defaulted 7(a) loan?
- Can a lender accept a "soft offer" for collateral in liquidation, or is a formal appraisal always required for 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?
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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