Glossary · Doing the deal
Liquidation Proceedings(Liquidation)
In short
The process a lender initiates to sell off a defaulted borrower's collateral to recover the outstanding loan amount. This occurs when a business fails and the lender seizes assets.
What it means in a deal
If your business defaults and the loan is accelerated, the lender will begin liquidation proceedings. This involves selling business assets pledged as collateral, and potentially personal assets if you provided a personal guarantee or secondary collateral. Understand the implications of liquidation on your personal finances if the business fails.
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 Proceedings
- Can an SBA 7(a) loan finance the purchase of a business currently in bankruptcy proceedings?
- 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?
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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