Assignment and Assumption of SBA 7(a) Loans - How Do They Work?

Now imagine - you've been running a business with a guaranteed 7(a) loan from the Small Business Administration (SBA), and now it's time to hand over the reins. You might be wondering, can the loan be signed over to a new owner as part of a sale? And most importantly, what does the SBA have to say about that? 

Well, here's the thing - the answer isn't a straightforward 'yes' or 'no'. The SBA often needs to give an approving nod to the assignment, and several requirements must be fulfilled. 

The Must-Haves for the New Loan Holder

In a nutshell, the SBA has set 14 primary guidelines that must be adhered to, as detailed below:


The person looking to assume the loan - let's call them the assumptor - needs to meet the eligibility requirements for a 7(a) loan as stated in the latest version of the SBA’s standard operating procedures. This criterion may not apply if the assumption is part of a workout or if the loan is in the process of liquidation.

The assumptor should ideally be the primary owner of the company.

Comparing credentials, the assumptor should bring to the table similar or superior business acumen and managerial expertise as the previous borrower.

A spotless credit history is a must for the assumptor.

The assumptor should be able to repay the SBA loan in full.

No item of collateral must be released during the process.

No collateral should be considered subordinate, unless otherwise stated regarding funds used for maintaining or increasing its value.

The business shouldn't experience any negative impacts due to the loan assignment.

Ensuring the recovery value of collateral remains unaffected is another important consideration.

If the current collateral doesn't fully secure the loan, more should be appended whenever possible.

All existing borrowers shouldn't be released without SBA’s prior written consent.

It's mandatory to have a signed written agreement outlining the terms of the assumption, with all involved parties being signatories.

The assumption terms must incorporate a "due on sale or death" provision, thereby disallowing any future loan assignment.

The deal must not include a real estate contract. This means the seller can't hold the property title until a stipulated amount is paid off.


If these rules seem overwhelming, worry not! Expert insight can help navigate this intricate affair. 

Where to Seek Help?

If your SBA loan default is causing you tossing and turning nights, reach out to Lawscape at the Lawscape. Book your complimentary initial consultation at 1-212-460-5004.

Why Rely on Lawscape?

Lawscape and his team have unraveled millions’ worth of SBA and Treasury debts - saving clients the hassle of bankruptcy and the fear of home foreclosure!

Even when it comes to challenging territories like AWG Hearings, the Treasury Offset Program, Cross-servicing Disputes, and private collection agency representation, Lawscape's solid strategy and aggressive representation have seen clients through.

Under the Agency Practice Act, Lawscape is authorized to represent debtors throughout the United States, relative to the SBA, the SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.