SFNet, SBA Agree to Revised EIDL Subordination Terms for Lenders Effective Immediately

October 3, 2022

By Secured Finance Network


We are pleased to announce that SFNet, with the assistance of various of its members, has successfully negotiated a consensual form of subordination agreement with the Small Business Administration (“SBA”) allowing asset-based lenders priority over certain of the same collateral granted to the SBA  under an SBA facility whether the ABL facility is put in place prior to or after the SBA facility goes into effect. By way of an overview and by no means meant to be legal advice, the revised form of subordination allows ABL lenders priority over the SBA’s lien on the borrower’s accounts, inventory, equipment, general intangibles, books and records, data and proceeds thereof relating to such accounts. This subordination is neither limited by the amount of the SBA’s or asset-based lender’s facility or the practices of any particular SBA regional office. A copy of the revised forms can be found here:

SBA COVID EIDL Subordination Lender - El Paso

SBA COVID EIDL Subordination Lender - Birmingham

While a notice provision still remains in the form affording the SBA 30 days prior notice before the ABL lender may exercise default remedies, this provision is modified by allowing the ABL lender to waive the 30-day notice period and immediately exercise remedies if the lender “reasonably believes that such delay is likely to decrease the value of the Subordinated Collateral or otherwise impair the lender’s ability to collect the Subordinated Collateral.”

We have been advised by the SBA that this form of Subordination Agreement is now in place and can be used immediately.  We’d like to acknowledge the support of the AFA, whose efforts in achieving similar relief for our collective factoring community helped pave the way for this outcome.

We suggest you consult with your counsel for further advice.


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