SBA Form 413 Contingent Liabilities (Not Section 5)

On the current SBA Form 413, there is no Section 5 for contingent liabilities. They sit in a panel on page one, right next to Section 1 (Source of Income), while Section 5 is where you list other personal property and other assets. If you came here searching for "Section 5 contingent liabilities," you are looking for the right thing under the wrong number, and this post walks the four lines that actually make up that panel.

Key takeaways:

• Contingent liabilities are a panel beside Section 1, not Section 5. Section 5 holds other personal property and other assets.
• The panel has four lines: As Endorser or Co-Maker, Legal Claims and Judgments, Provision for Federal Income Tax, and Other Special Debt.
• A guarantee on the loan you are applying for does not go here; a guarantee on a separate or prior loan does.
• Contingent liabilities do not reduce your net worth on the form. They are disclosed, not subtracted.
• Omitting one is the most common contingent-liability callback, because lenders see most guarantees and co-signed debt on the credit report anyway.

"Section 5 contingent liabilities" is a numbering mix-up

The current Form 413 (rev. 05-24) has eight numbered sections plus two boxes that are not numbered: the Source of Income box and the Contingent Liabilities box, which sit side by side near the top of page one. Because the numbered list and the boxes share the page, it is easy to count the Contingent Liabilities box as "Section 5" when you are skimming a blank form or a third-party copy. Here is the actual layout:

Section 5 is where you describe a privately held business interest, a boat, or a jewelry collection, not where you disclose a personal guarantee. The walkthrough for every numbered section lives in our section-by-section guide to filling out Form 413; this post stays on the contingent-liabilities panel.

What a contingent liability actually is

The accounting definition underwriters lean on, IAS 37, is a possible obligation that arises from a past event and whose existence is confirmed only by some uncertain future event outside your control. A direct liability, by contrast, is money you owe today no matter what happens next: your mortgage, your car loan, your credit-card balance. Direct liabilities go in the main column and reduce your net worth. Contingent liabilities go in the panel and do not.

That placement has a practical consequence. Net worth on Form 413 is total assets minus total direct liabilities, full stop. The contingent panel sits to the side as a separate risk read for the underwriter. If you want to sanity-check the net-worth math on the main columns before you sign, the free net-worth calculator adds and subtracts the same way the form does.

The four lines in the contingent-liabilities panel

The panel has four named lines. Each captures a different flavor of "I might owe this," and the underwriter reads them as a set.

As Endorser or Co-Maker

This is the line that matters most, because it catches personal guarantees and co-signed debt, the two contingent liabilities almost every business owner has and almost everyone underestimates.

List the full obligation amount, not your ownership share and not your guess at the odds. If you guaranteed a $200,000 line of credit for your operating LLC, you write $200,000, even if the LLC has never missed a payment and you own only 30% of it. The form wants the exposure, not a probability-weighted estimate.

What lands here:

• A personal guaranty on a loan or line of credit for a business you co-own.
• A co-signed auto loan, student loan, or personal loan for a family member.
• A guaranty on a prior, separate SBA loan that is still outstanding.

Common mistake. Owners treat a guaranty on their own company's debt as "business, not personal" and leave it off. The lender's UCC search finds the lien, the guaranty carries the owner's name, and the file comes back.

Legal Claims and Judgments

Pending lawsuits and unsatisfied judgments with a quantifiable dollar exposure go here. If you are a defendant in a suit seeking $75,000 in damages, or a judgment was entered against you and has not been paid, that is an obligation the lender needs to see.

The "reasonably possible" standard from IAS 37 is the right mental model: a filed suit with a real damages number belongs on the line, a baseless threat with no complaint filed usually does not. When you are unsure, disclose it with a one-line note on status and let the underwriter weigh it. They would rather read a disclosure they end up discounting than discover an omission in a court-record search.

Provision for Federal Income Tax

This is the line people read as a typo. It is federal income tax you have accrued or anticipate for the current year that is not yet due. A 1099 earner or an owner taking large distributions can carry a real number here before the filing deadline arrives.

Keep it separate from Section 6 (Unpaid Taxes), which is for tax you already owe and have not paid, including an IRS installment-plan balance. Accrued-but-not-due goes in the contingent panel; past-due goes in Section 6. Dropping a past-due balance into the provision line is a quick way to earn a clarification request.

Other Special Debt

The catch-all. Anything that functions as a contingent obligation but does not fit the first three lines: a standby letter of credit, a performance or surety bond, or a credit enhancement you have signed for someone else. Some lenders also ask you to itemize a commercial-lease guaranty here rather than under As Endorser or Co-Maker; either location is fine as long as it is disclosed and labeled.

Write a short description with the obligee's name and the total exposure so the underwriter does not have to call to ask what it is.

The one guarantee that does not go here: your own SBA loan

Every 20%+ owner of the borrower signs an unconditional personal guaranty on the SBA loan being applied for. That guaranty does not get listed as a contingent liability on your Form 413. It is part of the transaction in front of the lender, not a pre-existing obligation they need you to disclose, and listing it usually triggers a clarification call because the underwriter cannot tell whether you mean the subject loan or a different one.

A guarantee on a separate loan is a different story. If you guaranteed a partner's note, a prior SBA 7(a), or your operating company's line of credit at another bank, those are pre-existing contingent obligations and they belong under As Endorser or Co-Maker. This distinction matters more in 2026 than it used to.

The SBA's May 18, 2026 decision to double the cumulative 7(a) and 504 limit to $10 million means more borrowers are stacking a new SBA loan on top of one they already guarantee. The guaranty on the existing loan is a contingent liability on the new application. Borrowers who forget this are the ones whose files come back when the underwriter pulls the prior SBA loan in the agency's own system.

What does not go in the contingent-liabilities panel

Three things get miscategorized here constantly:

• Direct debts you already owe. Your mortgage, car loan, credit-card balances, and personal notes are direct liabilities. They go in the main liability column and their schedules (Section 2 for notes payable, Section 7 for other liabilities), where they reduce your net worth. The contingent panel is only for obligations that are not yet yours.
• Taxes you already owe. Past-due federal, state, or local tax, including an IRS installment-plan balance, goes in Section 6 (Unpaid Taxes), not in the Provision for Federal Income Tax line.
• Ongoing alimony and child support. Court-ordered support you already pay is handled on the income side and, where the lender wants the future obligation called out, in Section 7. A lump-sum equalization payment still being litigated in a pending divorce is the kind of uncertain obligation that can instead land under Legal Claims and Judgments.

A personal guarantee on a co-owned business's debt belongs in the panel under As Endorser or Co-Maker. Some SBA-preferred lenders also ask you to carry a one-line cross-reference in Section 7 so the obligation appears in both places. Disclosing in both is never what sinks a file; disclosing in neither is.

A 60-second contingent-liabilities pass

Before you sign, run this list against the panel beside Section 1:

• Have you co-signed or guaranteed anyone else's loan, such as a child's student loan, a family auto loan, or a friend's personal loan? → As Endorser or Co-Maker.
• Have you personally guaranteed a loan, line of credit, or equipment lease for a business you own part of? → As Endorser or Co-Maker.
• Do you have a prior SBA loan with an unconditional guaranty still outstanding? → As Endorser or Co-Maker.
• Are you a defendant in a lawsuit with a quantifiable dollar exposure, or do you have an unsatisfied judgment? → Legal Claims and Judgments.
• Have you accrued federal income tax for this year that is not due yet? → Provision for Federal Income Tax.
• Have you signed a standby letter of credit, performance bond, surety obligation, or a lease guaranty that does not fit the first three lines? → Other Special Debt.

If every answer is no, write $0 on each line rather than leaving them blank. A blank panel reads as "skipped," not "none."

The contingent-liabilities pattern extends past SBA deals to any application that asks for a personal financial statement; the co-signer financial statement use case covers how that exposure reads when you are the one backing someone else's debt.

Where to start

Open your most recent tri-merge credit report and your business loan and lease documents before you touch the panel. Every guaranty and co-signed account you need to disclose is already on one of those pages; the panel is just where you copy it over. If a line is genuinely zero, write $0 rather than leaving it blank.

For the rest of the form, the section-by-section walkthrough and the worked $350K 7(a) example show every numbered section with real numbers, and the SBA Form 413 guide covers how the lender uses the form alongside the rest of the package. If you would rather start from a structured layout than a blank PDF, the SBA Form 413 template matches the section numbering, and the business loan applications use case covers generating and refreshing the form through underwriting. More SBA mechanics live in the SBA lending archive.

FAQ

Is contingent liabilities Section 5 on SBA Form 413?

No. On the current SBA Form 413 (rev. 05-24), contingent liabilities are a panel beside Section 1 (Source of Income), not a numbered section. Section 5 is "Other Personal Property and Other Assets." The four contingent-liability lines are As Endorser or Co-Maker, Legal Claims and Judgments, Provision for Federal Income Tax, and Other Special Debt.

What counts as a contingent liability on SBA Form 413?

Personal guarantees on a co-owned business's loan or commercial lease, co-signed auto, student, or personal loans, pending lawsuits with quantifiable exposure, federal income tax accrued but not yet due, and other backing such as standby letters of credit or performance bonds. A contingent liability is an obligation that becomes payable only if a specific future event occurs, so it is disclosed in its own panel rather than added to your direct liabilities.

Do I list the personal guarantee on the SBA loan I am applying for?

No. The unconditional personal guaranty you sign on the loan being applied for is part of that transaction, not a pre-existing contingent liability, so it does not go in the panel. A guarantee on a separate or prior loan, including a prior SBA loan that is still outstanding, does belong under As Endorser or Co-Maker.

Do contingent liabilities reduce my net worth on Form 413?

No. Contingent liabilities are disclosed in their own panel and are not subtracted from your assets. Net worth on Form 413 equals total assets minus total direct liabilities; the contingent-liabilities panel is a separate risk disclosure the underwriter reads alongside the net-worth line, not part of the net-worth math.

What is the difference between Provision for Federal Income Tax and Section 6 Unpaid Taxes?

Provision for Federal Income Tax, in the contingent-liabilities panel, is federal income tax you have accrued or anticipate for the current year that is not due yet. Section 6 (Unpaid Taxes) is for tax you already owe and have not paid, including an IRS installment-plan balance. Accrued-but-not-due goes in the contingent panel; past-due goes in Section 6.

What happens if I leave a contingent liability off Form 413?

Lenders pull a tri-merge personal credit report, a business credit report, and UCC and county judgment searches during underwriting. Omitted personal guarantees and co-signed debt usually surface in at least one of them. Omission turns a math problem into a misrepresentation problem, which is far harder to recover from, and the certification you sign on Form 413 is given under penalty of criminal prosecution.