# What is piggyback financing, and can an SBA loan be part of it?

**Short answer:** Piggyback financing pairs loans for the same purpose, with the SBA loan in a junior or no lien position on the other loan's collateral. A 7(a) loan must not use it. Source: SOP 50 10 8.1, App. 19, Para. A.1.

Canonical page: https://www.sbaexpress.loans/answers/what-is-piggyback-financing-on-an-sba-loan/
Last checked: 2026-11-08

Piggyback financing is a stacked loan structure that SBA bars for 7(a) loans. SOP 50 10 8.1, App. 19, Para. A.1, Adequacy of collateral, says a lender must not have a 7(a) loan in a piggyback structure.

The SOP's test has three parts:

- One or more lenders make more than one loan to a single borrower.
- The loans come at or about the same time, for the same or similar purpose.
- The SBA-guaranteed loan has a junior lien or no lien on the collateral securing the non-SBA loan.

Loans approved within 90 days of one another count as made at or about the same time.

## A simple example

A bank makes a conventional first mortgage to buy a building. A 7(a) loan for the same purchase then takes a second lien on that building, within 90 days. That fits the test.

## Structures that are not piggyback

- Both loans are for working capital, and the non-SBA loan is secured only by working or trading assets.
- The loans share a lien position (pari passu), and the non-SBA loan's maturity is not shorter than the SBA loan's maturity.

## Why SBA bars it

The rule sits next to the ban on preferences. A lender may not take action on an SBA-guaranteed loan that establishes a preference in its own favor (App. 19, Para. A.1; 13 CFR § 120.411).

App. 15, Para. C.3.c, applies the same ban to loans that buy a business. The 504 program is different. A 504 loan usually takes a second lien by design, behind a third party lender (13 CFR § 120.934).

## Sources

- [SOP 50 10 8.1, App. 19, Para. A.1, Adequacy of collateral (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. 15, Para. C.3.c (Para. C begins p. 371)](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 § 120.411](https://www.ecfr.gov/current/title-13/section-120.411)
- [13 CFR § 120.934](https://www.ecfr.gov/current/title-13/section-120.934)