Glossary · The loan itself
Deficiency
In short
A deficiency occurs when the proceeds from liquidating collateral after a loan default are less than the outstanding loan balance. The borrower is still liable for this remaining amount.
What it means in a deal
If your SBA loan defaults and the lender liquidates all pledged collateral, but the funds raised don't cover the entire outstanding debt, that remaining unpaid amount is the deficiency. Since most SBA loans require a personal guarantee, you, as the guarantor, are personally responsible for this deficiency, which can lead to a personal judgment.
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
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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