Glossary · Doing the deal
Liquidation
In short
The process of selling a borrower's collateral to recover funds after a loan default. This is the lender's final step to mitigate losses when a borrower cannot repay.
What it means in a deal
If your business loan defaults and payment plans fail, the lender will begin liquidation. They seize and sell pledged collateral, such as business assets or real estate, to recover outstanding debt. Understand your pledged collateral and its potential liquidation value.
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 Liquidation
- What is the required timeframe for a lender to submit a liquidation plan?
- How does a lender comply with SBA requirements for maximizing recovery on collateral during liquidation?
- What specific documentation must a lender include in a liquidation plan submitted to the SBA?
- What constitutes diligent liquidation efforts a lender must demonstrate before submitting a guaranty purchase request?
- What is the process for a lender to obtain SBA approval for extraordinary liquidation expenses?
- What minimum collection efforts must a lender demonstrate before submitting a 7(a) liquidation plan?
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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