When making SBA 7(a) loans, lenders must take all actions necessary to perfect the lender’s lien on all required collateral. Failure to do so may result in full, or partial, denial of the SBA guaranty. In some jurisdictions, lenders have experienced delays between the time when a lender files a lien with the appropriate office and when it is recorded by that office. These delays have caused frustration for lenders who sell SBA 7(a) loans on the secondary market. In response to the delays experienced by lenders in various jurisdictions, SBA released Procedural Notice 5000-872764, Revisions to SOP 50 10 8 – 504 and 7a Loan Program Updates with an effective date of September 30, 2025. Click here to read Procedural Notice 5000-872764.
Pursuant to the Procedural Notice, lenders may sell loans on the secondary market after filing a required lien with the appropriate office, but before receiving proof from the appropriate office that the required filing was recorded. Lenders must obtain a valid and enforceable security interest in any loan collateral with evidence of proper lien priority and must retain in their loan file proof of the lien filings, and, when received, proof of the recordation of the liens.
While the revised guidance offers lenders with an option when there is a delay in lien recording, lenders must be aware that if the loan defaults, and there is a loss resulting from the lender’s failure to obtain a properly perfected and recorded required lien with the required priority, the lender will be subject to a full or partial denial of liability equal to the guaranteed share of the net loss.
If your lending institution has questions about SBA collateral requirements and lien recordation, or any other SBA lending matters, please contact us at SBAQuestions@JellumLaw.com.