SBA Jargon Translated

What it actually means: The SBA said yes to backing the loan. This is not the same as getting money. This is the SBA telling the bank "if this person defaults, we'll cover our share." You still need to close the loan, sign the documents, and wait for disbursement. Authorization is a green light, not a finish line.

What it actually means: The SBA has given up on collecting from you through normal channels. This does NOT mean the debt is forgiven. It means they've reclassified it internally and are handing it to more aggressive collectors, usually the Treasury Department. Your credit takes a devastating hit, and the debt is still very much alive. Read more in our guide on what the SBA doesn't tell you.

What it actually means: Something you own that the SBA can take if you don't pay. For loans over a certain threshold, the SBA requires specific collateral (real estate, equipment). For EIDL loans, they filed a blanket lien on all business assets, meaning everything your business owns is technically collateral whether you agreed to list it or not.

What it actually means: The SBA has given up trying to collect your debt themselves and has handed it to the Treasury Department. Treasury has tools the SBA doesn't, including the ability to intercept your tax refunds, reduce your Social Security payments, and garnish your wages. This is an escalation, not a transfer. Things are about to get worse.

What it actually means: This is specific to 504 loans. A CDC issues a debenture (basically an IOU) that the SBA guarantees. The proceeds fund part of your loan. You don't need to understand the mechanics of debentures to get a 504 loan, but you will see this word in your documents and wonder what it means. Now you know. It's a bond. The SBA backs it. You owe money on it.

What it actually means: You broke the rules of the loan. Usually this means you missed payments, but it can also mean you violated other loan covenants (sold collateral without permission, didn't maintain insurance, etc.). Default triggers acceleration, meaning the SBA can demand the full remaining balance immediately, not just the missed payments. Default is the point where collections begin in earnest.

What it actually means: You actually got the money. After authorization, closing, document signing, and whatever other delays the process generated, disbursement is when funds land in your account. For disaster loans, disbursement can happen in stages, meaning you might get part of the money now and the rest later, or never, depending on the SBA's assessment of your needs.

What it actually means: Your business lost money because of a disaster (pandemic, hurricane, etc.). This is the "EI" in EIDL. The SBA theoretically measures economic injury to determine how much you can borrow. In practice, during COVID, the SBA used a formula based on your reported revenue and cost of goods sold, and the accuracy of that formula is, shall we say, debatable.

What it actually means: The SBA's direct loan program for disaster-affected businesses. During COVID, this became the largest direct lending operation in SBA history, distributing over $400 billion. The loans carry a 3.75% interest rate for businesses (2.75% for nonprofits) with 30-year terms. "Temporary loss of revenue" turned out to be optimistic for a lot of borrowers, and now millions are in default or collections on loans they may never be able to repay.

What it actually means: The SBA agrees to let you pause or reduce payments for a period. This doesn't reduce what you owe. Interest continues to accrue. When forbearance ends, you still owe the full amount plus whatever interest accumulated during the pause. Forbearance is a breathing room, not a solution. It delays the problem.

What it actually means: The SBA promises the bank that if you don't pay, the SBA will cover 75-85% of the loss. This is the entire foundation of SBA lending. The guarantee makes the bank willing to lend to you. It does NOT mean the SBA guarantees you'll get approved, that you'll get good service, or that anything will happen on a reasonable timeline. The guarantee protects the bank, not you.

What it actually means: If you can prove you're in financial distress, the SBA may agree to reduce your payments, extend your term, or make other modifications to keep you from defaulting. The SBA doesn't widely advertise this option, and the application process is poorly documented. But it exists, and requesting one before you default is significantly better than trying to negotiate after you're already in collections.

What it actually means: The SBA has a legal claim on your stuff. If you don't pay, they can seize or force the sale of the property the lien is attached to. For EIDL loans, the SBA filed blanket liens on all business assets. For larger loans with personal guarantees, liens can extend to personal property including real estate. A lien is the SBA's way of saying "we own a piece of this until you pay us back."

What it actually means: The SBA or the bank is selling your stuff to get their money back. After default, if you can't work out a payment arrangement, the lender or the SBA can liquidate the collateral, meaning they sell your business assets (equipment, inventory, real estate) and apply the proceeds to your loan balance. Whatever's left after liquidation, you still owe.

What it actually means: The SBA agrees to change something about your loan, such as the interest rate, payment amount, or maturity date. Modifications are possible but not guaranteed, and getting one approved involves paperwork, documentation of hardship, and patience. A modification is different from forbearance because it permanently changes the loan terms rather than temporarily pausing them.

What it actually means: The SBA has set aside money for your loan. This is not the same as receiving money. Obligated means the SBA has made an internal accounting entry saying "this money is earmarked for this borrower." You still need to complete the closing process, sign documents, and wait for disbursement. Many borrowers have seen their loans "obligated" in the portal and assumed money was coming, only to wait months more.

What it actually means: You negotiate with the SBA to pay a lump sum that's less than your total balance, and they agree to forgive the rest. Sounds great. In practice, the SBA's offer in compromise program has been criticized for being nearly impossible to navigate. Approval rates are low, the documentation requirements are extensive, and the SBA's definition of "acceptable offer" may not match yours. But the program exists, and for borrowers who genuinely cannot repay the full amount, it's worth exploring.

What it actually means: You are personally on the hook. If your LLC or corporation can't pay the loan, the SBA comes after your personal assets: savings, home equity, vehicles, future earnings. The limited liability protection your business structure provides does not protect you from a personal guarantee. You signed away that protection when you signed the guarantee form. This is covered in depth in our guide on what the SBA doesn't tell you.

What it actually means: You're asking the SBA to look at your application again, hopefully with better documentation or corrected information. Reconsideration is not an automatic second chance. You need to provide something new that addresses the reason you were denied. Submitting the same application and hoping for a friendlier reviewer is not a strategy. Our full appeals guide covers this in detail.

What it actually means: A faster version of the standard 7(a) loan, with loans up to $500,000 and a 50% SBA guarantee (lower than the standard 75-85%). The bank has delegated authority to make approval decisions without sending each loan to the SBA. "Express" is relative, though. Faster than the standard 7(a) doesn't necessarily mean fast by any normal human definition of the word.

What it actually means: Volunteer mentors, mostly retired business executives, who provide free counseling to small business owners. SCORE is actually one of the better things the SBA funds. The mentors are real people with real experience, and the advice is free. Whether they can help you navigate the SBA's own bureaucracy is another question, but for general business guidance, SCORE is worth contacting.

What it actually means: The SBA agrees to let another lender's claim on your assets take priority over the SBA's claim. You might need this if you're trying to get a new loan from a different lender who doesn't want to be in second position behind the SBA. Getting subordination approved requires a formal request, documentation, and the SBA's agreement that it won't be harmed by the arrangement. It's a process, because everything with the SBA is a process.

What it actually means: The federal government takes money it owes you (tax refunds, Social Security, federal salary) and applies it to your defaulted SBA loan. This happens after your debt is referred to the Treasury Department. You typically find out when your tax refund doesn't arrive and you get a letter explaining it was intercepted. Detailed breakdown in our fine print guide.

What it actually means: A public record that tells the world the SBA has a claim on your business assets. Anyone who searches your business name in a UCC database will see this filing. Other lenders will see it when you apply for financing elsewhere. The filing remains in place until the loan is fully repaid and the SBA files a termination. It's a public announcement that you owe the SBA money and they've called dibs on your stuff.

What it actually means: The bank (and sometimes the SBA) is deciding whether lending to you is a good idea. They look at your credit, your financials, your business plan, your collateral, and your industry. Underwriting is where applications go to wait, because it requires a human to actually review your file, and that human has a stack of other files to review first. For SBA loans, underwriting happens at the bank level AND sometimes at the SBA level, doubling the opportunity for delays.

What it actually means: After you've defaulted, the SBA or the lender may be willing to negotiate new terms rather than pursuing full collection. This might include a reduced payment schedule, a lump-sum settlement, or modified terms. A workout agreement is essentially an admission by both parties that the original loan terms aren't working and something has to change. Getting one requires negotiation, documentation of your financial situation, and patience.

What it actually means: Functionally similar to a charge-off. The SBA has decided this money isn't coming back through normal collection and has removed it from their active books. This is an accounting action, not a forgiveness action. The debt may still be pursued through Treasury offset or other collection mechanisms. And if the written-off amount is significant, you may receive a 1099-C reporting the cancelled debt as taxable income. The SBA writes it off their books. The IRS adds it to yours.