Glossary · Doing the deal
Encumbrance
In short
An encumbrance is a claim or liability against an asset, like a lien or a mortgage, that restricts its transferability or use. It means someone else has a right to that asset.
What it means in a deal
During an acquisition, your lender will perform lien searches to identify any existing encumbrances on the business's assets. All encumbrances must be cleared at closing to give your lender a first lien position on the collateral for your SBA loan. This ensures a clean transfer of assets.
Official sources
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 Encumbrance
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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