Glossary · Doing the deal
Commercially reasonable effort
In short
This standard requires a lender to act in a practical, prudent business manner when trying to collect on a defaulted loan. It means they can't just sit on their hands.
What it means in a deal
When a loan defaults, the SBA requires lenders to use "commercially reasonable efforts" to minimize losses, often by liquidating collateral. As a borrower, this means the lender must take sensible steps to recover funds, but it doesn't prevent them from acting aggressively when necessary.
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 effort
- 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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