Glossary · The loan itself
Senior debt
In short
Senior debt is borrowing that takes priority over all other debts if the business goes bankrupt or liquidates. Your SBA 7(a) loan is typically considered senior debt.
What it means in a deal
As the primary lender, the SBA 7(a) loan will hold the first lien position on your business assets, making it senior debt. This means if the business fails, the SBA lender gets paid before any other creditors with junior claims, such as a seller note that is Fully Subordinated. This priority is a key aspect of how the SBA guaranty functions.
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 Senior debt
- Can I use an SBA 7(a) loan for debt consolidation of existing business debts?
- How is prior owner debt converted to equity treated for injection purposes?
- Can I use an SBA 7(a) loan to refinance existing business debt?
- Can an SBA 7(a) loan be used to refinance existing business debt?
- Can I use an SBA 7(a) loan to pay off personal debt?
- Does the SBA require a specific debt service coverage ratio (DSCR) for 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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