Coleman SBA 7(a) Real Estate Loan Collateral Narrative

Narrative Purpose (Summary)

The SBA 7(a) Real Estate Collateral Narrative explains how pledged property supports repayment of the loan, aligns with SBA SOP 50 10 requirements, and documents collateral coverage. It also guides the SBA loan underwriter through a step-by-step process—from identifying collateral and verifying valuation to confirming lien position, applying required discounts, and documenting compliance and any shortfall. A concise, well-structured narrative ensures transparency, mitigates risk, and strengthens the lender’s guaranty protection.

SBA 7(a) Real Estate Collateral Narrative – Step-by-Step Flow

Step 1. Identify the Property

Describe the real estate (address, type, use, square footage).
Confirm whether it is owner-occupied or investment property.
State the role of the property in the borrower’s business operations.

Step 2. Gather Valuation Evidence

Obtain a current appraisal or evaluation consistent with SBA policy.
Record the market value and date of the appraisal.
Note any relevant assumptions, conditions, or environmental requirements.

Step 3. Apply SBA Collateral Discounts

Apply SBA’s standard discounting rules (e.g., 85% for improved real estate).
Adjust for marketability, location, or special-use considerations if applicable.
Show the resulting net adjusted collateral value.

Step 4. Document Lien Position

Calculate available equity after deducting senior liens.

State whether the lien is first, second, or junior position.

List any prior encumbrances with outstanding balances.