Glossary · Doing the deal
Commercially reasonable method
In short
A standard requiring sensible, prudent actions in line with industry practices, especially when selling collateral. Lenders must follow this during liquidation.
What it means in a deal
When an SBA loan defaults and the lender liquidates collateral, they are required to do so in a "commercially reasonable method." This means they can't just dump assets; they must try to get the best possible price under the circumstances. As a buyer, this concept is important to understand what happens if a loan goes bad, ensuring the lender acts responsibly.
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 method
- 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?
- What valuation method is required for an SBA 7(a) acquisition loan over $500,000?
- What is the exact calculation method for the prepayment penalty on an SBA 7(a) loan if paid off early?
- How does the SBA ensure the valuation of goodwill is reasonable for an acquisition loan?
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.
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.