Glossary · The loan itself
Prudent servicing practice
In short
This refers to the reasonable and responsible actions a lender takes to manage and collect on a loan, protecting both their and the SBA's interests.
What it means in a deal
SBA lenders must follow prudent servicing practices, meaning they act like any reasonable commercial lender would to protect the loan. If a lender fails to do so, the SBA can deny or reduce the guaranty payment if the loan defaults. This impacts how a lender manages your loan post-closing.
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 Prudent servicing practice
- Are there annual servicing fees or other recurring charges beyond the SBA servicing fee?
- What servicing actions require prior written SBA approval?
- What constitutes prudent lending standards for SBA 7(a) underwriting?
- How is the ongoing servicing fee calculated and remitted to the SBA?
- Which servicing actions can a 7(a) lender take without prior SBA approval?
- What servicing actions can a 7(a) lender take without prior SBA approval?
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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