Here’s what you need to know about SBA loan requirements and the application process.
We’ll start with a short questionnaire to better understand your unique business needs.
Once we discover your personalized matches, our team will consult with you on the process to follow.
General SBA loan requirements
Must be a for-profit, officially registered and legally operating business.
Must operate in an eligible industry.
Certain types of businesses are not eligible for SBA loans, including businesses involved in lending activities, any business whose primary business is gambling, and churches and other religious organizations.
Must be physically located and doing business, or offering to do business, in the United States or its territories.
Must have tried to find alternative forms of financing before turning to an SBA loan.
Must be able to demonstrate a need for loan funds.
Must be able to show the “valid business purpose” for which you plan to use the funds.
size of the company
Must be a small business, as defined by the SBA. The definition of small varies by industry and is usually expressed in number of employees or average annual revenue. The SBA offers a interactive tool which helps you determine if you meet this requirement.
Cannot be past due on any existing government debt.
No one with 20% or more ownership of the company can currently be incarcerated, on probation, on parole, or charged in criminal proceedings.
SBA loan underwriting requirements
Here’s what a lender will likely use to assess your eligibility for an SBA loan:
Personal credit history
You will generally need to have good credit – a score of 690 or higher. Again, the SBA does not designate a minimum credit score, so you may have some flexibility depending on your lender and other qualifications.
Business Credit History
Similar to your personal credit, you will want to have a strong business credit history. In many cases, the SBA uses the FICO Small Business Scoring Service, or SBSS, to assess your business’ credit history and prescreen 7(a) loan applications.
Currently, you will need to receive a score of 155 or higher to pass prescreening – scores range from 0 to 300. Even if you do not pass prescreening, a lender may choose to pursue your application. However, lenders can also set their minimum accepted SBSS scores higher than the SBA minimum.
Time spent in business
Although some lenders work with new businesses, most will require you to be in business for at least two years.
You will need to show strong annual revenue and cash flow forecasts. You shouldn’t have too much existing debt that you can’t afford for this additional financing. You’ll want to have a debt service coverage ratio (also known as DSCR) — which compares your available operating income to your current debts — of 1.15 or higher.
SBA loan application requirements
To submit your SBA loan application, you will be asked to provide detailed documentation. Some of these requirements vary depending on your lender and loan program, but here are the most common documents and forms you’ll need to provide:
SBA Form 1919, Borrower Information Form.
SBA Form 912, Declaration of Personal History.
Personal financial statement (you can use SBA Form 413).
SBA Form 148, Unconditional Guarantee (or lender’s equivalent). The SBA requires anyone with 20% or more ownership of the business to provide an unlimited personal guarantee. Owners with less than 20% ownership can provide full or limited warranty (SBA Form 148L).
Company financial statements, such as income statements, balance sheets, and cash flow projections.
Detailed list of guarantees.
Existing debt schedule, if any.
Business certificates or licenses.
Loan application history.
Resume for every business owner.
Presentation and history of the company.
Program Specific Requirements
Some SBA loan programs have unique requirements.
There are four types of credit lines: Seasonal CAPLine, Contract CAPLine, Builders CAPLine and Working CAPLine. Borrowers must meet product use requirements (eg, be able to show a seasonal activity pattern) in addition to the requirements of Standard 7(a).
Find and compare small business loans
If an SBA loan isn’t right for your business or you want to compare loan options, NerdWallet has a list of small business loans that are best for business owners. All of our recommendations are based on market scope and lender track record and business owner needs, as well as rates and other factors, so you can make the right financing decision.