Glossary · The loan itself
Purchase money obligation
In short
Debt incurred specifically to finance the acquisition of an asset, where the asset itself serves as collateral for that debt. Your SBA loan is a purchase money obligation for the business.
What it means in a deal
When your SBA 7(a) loan is used to buy a business, it's considered a purchase money obligation. This typically gives the lender a "first lien" position on the acquired assets. Understanding this lien priority is important as it affects how collateral is handled in the deal.
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 Purchase money obligation
- What happens to my personal guaranty obligation if I later sell the business?
- If I sell the business, does the new owner inherit the prepayment penalty obligation for the SBA loan?
- Can an SBA 7(a) loan be used to purchase a business that has been losing money?
- Can I use an SBA 7(a) loan to purchase an existing business that is currently losing money?
- What counts as "my own money" for the down payment?
- How does the SBA decide how much money I can borrow?
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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