What collateral does a 7(a) Small loan require?
Short answer
None at $50,000 or less. Above that, expect a first lien on what the loan buys. If half or more of proceeds are working capital, expect liens on all fixed assets too. Source: SOP 50 10 8.1, App. 19, Para. B.2.
None at $50,000 or less. SOP 50 10 8.1, App. 19, Para. B.2, says collateralProperty a lender can take and sell if a loan is not repaid. is not required at that size. A lender may still take some under its own policies.
Above that line, up to the $350,000 maximum, the General Requirements apply with two specific tests:
- Assets financed. The lender must take a first lien on assets bought with loan proceeds. Exceptions cover certain vehicles and a subordinate lien for improvements to existing assets.
- Working capital at 50% or more of proceeds. Then the lender must take a lien on all fixed assets of the business, up to the point the loan is fully secured. Real estate is included, and assets count at the Standard 7(a) valuation limits.
SBA requires only those items. Para. B.2 says a lender may take more under its own policies, and it gives three examples:
- Available equity in personal real estate of any owners and guarantors
- Trading assets of the business
- Commercial, residential or investment real estate owned by the applicant, owners or guarantors
So on a loan that is not buying a business, a lien on your home is the lender's choice. On a Standard 7(a) loan, a collateral shortfall makes that lien a requirement (Para. B.1).
A lender can process a loan of $350,000 or less under Standard 7(a) rules instead. SBA says all Standard requirements then apply, including collateral (SBA Information Notice 5000-877673, Question 7, March 31, 2026). Ask which rule set your lender will use.
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