Glossary · The loan itself
Material Default
In short
A serious failure to meet loan terms, like missing payments. For a buyer, this means the SBA loan could be called, risking your business and personal assets.
What it means in a deal
If you miss too many payments or violate key loan covenants, your lender can declare a Material Default. This triggers the SBA guaranty and the lender will pursue all available collateral, including your personal guarantee. Understand your loan agreement's default clauses thoroughly.
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 Material Default
- What constitutes a "material default" by a 7(a) lender that would lead to an outright denial of a guaranty purchase request?
- What happens if I default on an SBA 7(a) loan?
- How does a lender request an SBA guaranty purchase after loan default?
- What are the consequences if SBA Form 1919 contains material omissions or misrepresentations?
- Can a lender approve a material change to collateral without prior SBA approval?
- What constitutes 'prudent liquidation' for a 7(a) loan to protect the SBA guaranty during default?
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.
See which SBA lenders would fund your deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to approve a 7(a) like yours and flag what trips up approval.
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.