# Who pays cost overruns on an SBA construction loan?

**Short answer:** You do. On 7(a) construction above $350,000, the lender must see evidence you can pay overruns before approving a contract change. Neither the lender nor SBA must increase the loan. Source: SOP 50 10 8.1, Sec. B, Ch. 6, Para. A.4.

Canonical page: https://www.sbaexpress.loans/answers/sba-construction-cost-overruns/
Last checked: 2026-11-08

Overruns fall on the borrower. SOP 50 10 8.1, Section B, Ch. 6, Para. A.4, says the lender and SBA need not increase the loan to cover them.

## 7(a) construction above $350,000

- Before approving any contract modification, the lender must obtain evidence you can pay overruns or added construction financing costs.
- Your construction contract must bar material changes to the plans without the written consent of the lender and the surety.
- If you are injecting funds, they must go in before the loan disburses.

## The 504 contingency

A 504 project can include a contingency fund for overruns. SOP 50 10 8.1, Section C, Ch. 1, Para. C.8, caps it at 15% of project construction costs. 13 CFR § 120.882(b) still says 10%, and the prior SOP 50 10 8 also said 10%. We found no SBA notice reconciling them, so ask your Certified Development Company (CDC) which limit it applies.

Unused contingency is handled by size. At 2% of the debenture or less, it may be refunded as working capital. Above 2%, the debenture must be reduced by the unused amount.

## What the 7(a) rules do not set

We found no required contingency percentage for 7(a) construction. Lender practice varies.

## Sources

- [SOP 50 10 8.1, Sec. B, Ch. 6, Para. A.4, Construction Loan Provisions (about pp. 203-204)](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, Sec. C, Ch. 1, Para. C.8 (about p. 227)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 120.882(b)](https://www.ecfr.gov/current/title-13/section-120.882)
- [SOP 50 10 8 (prior version), 504 Contingency Fund](https://legacy.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx)