Glossary · Doing the deal
Liquidation expenses
In short
Costs incurred by the lender when recovering assets from a defaulting borrower to satisfy a loan. These can include legal fees, appraisal costs, and selling expenses.
What it means in a deal
If your business defaults on an SBA loan, the lender will incur various costs to seize and sell collateral. These liquidation expenses are typically deducted from the proceeds of asset sales before applying funds to the outstanding loan balance, potentially increasing the amount still owed by guarantors.
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 expenses
- What is the process for a lender to obtain SBA approval for extraordinary liquidation expenses?
- 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?
- What specific documentation must a lender include in the Universal Purchase Package (UPP) to justify liquidation expenses?
- What documentation is required from a lender to justify liquidation expenses in a Universal Purchase Package (UPP)?
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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