Do SBA Loans Require Collateral?

In most cases, SBA loans require collateral — equipment, property or other assets that secure the loan in the case of default. The type and amount of collateral required, however, varies based on the loan program, lender and loan size.

Below, we’ll break down everything you need to know about SBA loan collateral requirements and what to do if you can’t meet them.

What is collateral for an SBA loan?

Collateral is an asset that you pledge to secure a small-business loan. If you fail to repay and your loan goes into default, the lender can claim the collateral to cover its losses.

For SBA loans, the term “collateral” typically refers to tangible, physical assets, such as:

• Real estate.

• Machinery and equipment.

• Furniture and fixtures.

• Inventory.

In some cases, your accounts receivable may also be used as collateral.

SBA loan collateral requirements by loan type

SBA 7(a) loans

SBA 7(a) loans are the most popular type of SBA loan. They are issued by participating lenders, like banks and credit unions, and partially guaranteed by the SBA. SBA 7(a) loans are available up to $5 million — and loans of more than $500,000 are referred to as standard 7(a) loans.

For standard 7(a) loans, the SBA requires that the lender make all attempts to “fully secure” the loan. This means that you must pledge all assets that are being acquired, refinanced or improved with the loan proceeds, as well as any additional fixed assets that have a value up to the loan amount. Your lender may secure these assets using a UCC lien, or another type of legal collateral agreement.

SBA lenders cannot deny your application solely on the basis of inadequate collateral. If you can’t fully secure your standard 7(a) loan with business assets, however, the lender must take a lien on your personal real estate^[0]

» MORE: Can you refinance with an SBA loan?

SBA 7(a) small loans

SBA 7(a) small loans (loans of $500,000 or less), have different collateral requirements than standard 7(a) loans.

For 7(a) small loans of $50,000 or less, lenders are not required to take collateral. For loans over $50,000, the SBA requires that lenders use their typical collateral policies for similarly sized non-SBA loans. This means if the lender usually requires collateral for its business loans of $200,000, then it should also require collateral for its SBA 7(a) loans of $200,000.

SBA lenders are not required to take out a lien on your personal property, however, even if it’s their standard policy to do so. And, like standard 7(a) loans, SBA lenders cannot deny your application solely due to lack of collateral.

» MORE: Everything you need to know about SBA Express loans

SBA CDC/504 loans

SBA CDC/504 loan funds come from three different sources:

• A bank or credit union (50%).

• A certified development company, or CDC (40%).

• You, the borrower (10%).

Although these loans have a more complicated structure than 7(a) loans, they have simple collateral requirements. SBA 504 loans are generally secured by the fixed assets (e.g. real estate, equipment) that they’re financing.

Your bank lender and the CDC will take out a lien on the asset that you’re financing. Additional collateral isn’t typically required.

SBA microloans

SBA microloans are funded by the SBA and issued by nonprofit intermediaries. Unlike other types of SBA loans, each intermediary creates its own business loan requirements. As a result, the collateral requirements for SBA microloans vary based on the lender.

Many microlenders, however, do require collateral. For example, Justine Peterson, a not-for-profit intermediary that issued the most SBA microloan dollars in the 2024 fiscal year^[0]

SBA disaster loans

SBA disaster loans provide financing to help small businesses recover from physical or economic damage as the result of a declared disaster. There are four types of SBA disaster loans, each addresses a specific need for business owners (and homeowners). The collateral requirements are as follows:

• Home and personal property loans and business physical disaster loans. Collateral required on loans of more than $50,000 in a Presidential disaster declaration, more than $14,000 in an SBA declaration.

• Economic injury disaster loans and military reservists economic injury disaster loans. Collateral required on loans of more than $50,000.

In general, the SBA prefers you to pledge real estate as collateral on a disaster loan.

What to do if you can’t meet SBA loan collateral requirements

If you don’t think you can meet the collateral requirements for your desired SBA loan, there are a few things you can do:

• Talk to your lender. In many cases, SBA lenders can’t deny your application solely on the basis of inadequate collateral. If you don’t have sufficient collateral, talk to your lender about other ways you can bolster your loan application. Keep in mind, however, that your lender may ask you to put up personal property if you can’t meet collateral requirements. This means that if you default on your SBA loan, the lender can claim that personal property to recover its losses.

• Opt for a smaller loan amount. If you don’t have enough collateral to secure your loan amount, consider if you can still meet your business goals with a smaller amount of funding. In some cases, if you opt for a loan of $50,000 or less, you may not be required to provide collateral.

• Consider alternatives. If you’re hesitant to put up your assets as collateral, you might consider unsecured business loans. These loans don’t require physical collateral, but you’ll likely still need a personal guarantee or UCC lien. Unsecured loans, especially those issued by online lenders, can be easier to qualify for — although interest rates can be higher than secured options.