Glossary · Doing the deal
Eligible Liquidation Expense
In short
Costs the SBA allows a lender to incur and claim when liquidating collateral from a defaulted loan. These are typically reasonable and necessary expenses.
What it means in a deal
If an SBA loan defaults and collateral is liquidated, only specific, justifiable costs incurred by the lender are covered by the SBA guaranty. As a buyer, you need to understand the potential for these expenses to reduce net recovery, should a worst-case scenario occur.
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 Eligible Liquidation Expense
- What specific documentation is required in the Universal Purchase Package (UPP) to support eligible liquidation expenses?
- How does a lender properly account for eligible liquidation expenses within the Universal Purchase Package (UPP)?
- How should a lender document eligible liquidation expenses within the UPP for a 7(a) guaranty purchase?
- How does business overhead expense insurance differ from key-person life insurance?
- What is the process for a lender to obtain SBA approval for extraordinary liquidation expenses?
- What specific documentation must a lender include in the Universal Purchase Package (UPP) to justify liquidation expenses?
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.