# How do SBA lenders value collateral on a 7(a) loan?

**Short answer:** At capped values. New equipment counts at no more than 75% of price. Used equipment counts at 50% of Net Book Value, or 80% with an appraisal. Improved real estate counts at 85% of market value. Source: SOP 50 10 8.1, App. 19, Para. B.1.

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Last checked: 2026-11-08

SBA caps how much of each asset counts toward fully secured. SOP 50 10 8.1, App. 19, Para. B.1, sets these limits on a Standard 7(a) loan:

- **New machinery and equipment:** no more than 75% of price, minus prior liens. Furniture and fixtures are excluded from this line.
- **Used or existing machinery and equipment:** no more than 50% of Net Book Value, or 80% with an Orderly Liquidation Appraisal, minus prior liens.
- **Improved real estate:** no more than 85% of market value.
- **Unimproved real estate:** 50% of market value.
- **Furniture and fixtures:** no more than 10% of Net Book Value or appraised value.
- **Trading assets, if taken:** no more than 10% of current book value.

Net Book Value means original price minus depreciation and amortization (App. 3).

## An illustration

Suppose a $1,000,000 loan secured by three assets with no prior liens. A building appraised at $600,000 counts for $510,000. New equipment priced at $200,000 counts for $150,000. Furniture with a $50,000 Net Book Value counts for $5,000. The total is $665,000, so the collateral shortfall is $335,000.

## When value is above book

If a lender assigns fixed assets more than Net Book Value, it must get an independent appraisal from a qualified person (App. 19, Para. A.1, Valuation of fixed assets). A fixed asset value inside a business valuation does not satisfy that rule, unless it is part of a going concern appraisal.

## Sources

- [SOP 50 10 8.1, App. 19, Para. B.1 (p. 408)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 19, Para. A.1, Valuation of fixed assets (Para. A begins p. 404)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 3, Net Book Value (App. 3 begins p. 297)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)