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ARTICLE · 01 OCTOBER 2019

Best Practices When Liquidating Real Estate-Secured SBA Loans

Ward and Smith, P.A
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For fiscal year 2018, the SBA made over $24 billion in loans under the 7(a) program and just under $5 billion in 504 loans.

United StatesFinance and Banking
Lance Martin
Lance Martin

For several years, the United States Small Business Administration (SBA) has experienced continuous growth with its flagship 7(a) and 504 business loan programs. 

For fiscal year 2018, the SBA made over $24 billion in loans under the 7(a) program and just under $5 billion in 504 loans.  As of fiscal year 2018, the SBA oversees a $92 billion SBA 7(a) loan portfolio, up from $56 billion in 2011.  The average 7(a) loan has increased from approximately $368,000 in 2014 to $420,000 in 2018.

Although charge-off rates are at post-Great Recession lows, defaults occur.  When an SBA loan goes into default and workout is impossible, the lender must liquidate all collateral that has "Recoverable Value."  This article looks at some issues a lender must consider when liquidating real property collateral. 

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