The CDC assesses collateral adequacy including the effect of recorded covenants, deed restrictions, easements, reversionary interests, options and costly engineering controls, documenting the analysis; has environmental indemnification provisions running with the land removed or waived as to the federal government; reviews title early for open-ended non-environmental indemnification provisions and obtains a recorded waiver or capped agreement before closing or else submits a 327 action with the provision and its good faith attempts. SBA normally takes a second (or pari passu) lien on project property; the CDC considers additional collateral for leasehold improvements, avoids encumbering assets the Borrower needs to operate or of minimal liquidation value, requires available personal assets to secure guaranties where business assets fall short, and removes arbitration clauses from title policies by endorsement. A seller acting as Third Party Lender is subordinate except for an assumed note, FDIC carry-back or qualifying OREO; SBA's lien is never behind tax-exempt financing; for mixed collateral it considers proportional liens, a first lien on shorter-term assets (at least a second lien), more equity or separate financing.
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.