Can you sell or replace equipment pledged on an SBA loan?
Short answer
Not without the lender's prior written consent, unless the sale is in the ordinary course of business. Lenders may not charge a fee for releasing or exchanging collateral, apart from out-of-pocket costs. Sources: SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.8.b; Sec. A, Ch. 4, Para. C.2.b.
Not on your own. You certified before disbursement that you would not sell, lease, pledge, encumber or dispose of property or assets without the lender's prior written consent. Sales in the ordinary course of business are excepted, as are purchase money liens on later-acquired property (SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.8.b).
What it costs
A lender may not collect a fee for the release or exchange of collateralProperty a lender can take and sell if a loan is not repaid. . Standard out-of-pocket expenses, such as recording fees, are permitted (Sec. A, Ch. 4, Para. C.2.b).
What the lender can do
SBA Form 148 lets a lender substitute or release collateral without a guarantor's consent (para. 4). The form says that does not reduce the guarantor's obligation.
504 loans
A non-PCLP Certified Development Company (CDC) needs SBA's prior written consent for larger collateral releases. The test is cumulative market value over 10% of the debenture or $10,000, whichever is less (13 CFR 120.536(b)(2)).
7(a) approval route
Whether your lender needs SBA's approval for a release depends on SOP 50 57 and SBA's Lender Matrix. Those documents are not among the sources behind this page.
What to bring the lender
Describe the item, the price and where the proceeds will go. If you are replacing equipment, ask how the new item will be pledged. Keep hazard insurance on remaining collateral (Sec. A, Ch. 5, Para. C.1).
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
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