Do I Qualify for an SBA 7(a) Loan?

If you’re thinking about applying for an SBA 7(a) loan, you’re in good company — the 7(a) is one of the SBA’s most popular programs.

It can feel like you’re being held back without access to more working capital, so the SBA offers small business owners like you support when you haven’t been able to find funding elsewhere. Just because you’re lacking cash flow history or a pristine credit score doesn’t mean you must give up on your dreams.

If you apply and are approved, the SBA will guarantee a loan from an SBA-approved lender for up to 90% of your loan amount. That means the lender can offer you better terms, whether you're a startup or a small business looking to expand.

SBA 7(a) Eligibility Requirements

If you’re looking for financing backed by the Small Business Administration, familiarize yourself with the SBA loan requirements below. They can broadly be placed into two categories: legal/operational and financial.

SBA 7(a) Legal and Operational Requirements

• You must be officially registered as a for-profit business, and you must be operating legally

• As the business owner, you can’t be on parole

• Your business must be physically based in the United States, and you must be doing business within the U.S. and its territories

SBA 7(a) Financial Requirements

• Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years

• Your net income must be under $5 million (after taxes and not counting carry-over losses), and your tangible net worth must be less than $15 million

• You must show invested equity: evidence that you’re investing your own time and money into the business

• Your small business must be in an SBA-eligible industry (speculative, illegal and non-profit businesses don’t get to play). Learn more about Eligible and Ineligible Industries for SBA 7(a) Loans

• You’ll need to show that you’ve already tried and failed get funds from other financial lenders, fully exhausting non-SBA loan options

• You’ll need to show a sound business purpose for the loan you’re requesting, and that your intended funds usage is approved by the SBA

• You’ll need to prove you’re not delinquent on any existing debts to the U.S. government (like taxes or student loan payments)

Other Beneficial Business Qualities

In addition to the eligibility requirements, there are a few qualities which can increase your likelihood of getting approved for an SBA 7(a) loan. 

• A good credit score, preferably above 680

• A history free from recent bankruptcies, foreclosures, or tax liens

• A business that has been in operation for at least two years

• The ability to provide collateral for loan requests over $25,000

• The ability to make a down payment of 10% if your intended use of funds is to purchase a business, commercial real estate, or business-related equipment.

• Sufficient cash flow to meet your debt obligations

• Sufficient working capital (once you subtract liabilities from assets)

• “Good character” according to the SBA (partially decided based on your track record of managing your resources and day-to-day business affairs)

SBA 7(a) Eligibility by Industry

Even if you already fall under the SBA definition of a small business, your particular industry may have additional industry-specific requirements, which mainly concern number of employees and revenue/receipts.

The SBA has two main standards for business size — fewer than 500 employees for manufacturing and mining industries, and under $7.5 million in average annual receipts for non-manufacturing industries. There are, of course exceptions, so you’ll want to check with the SBA's size requirements for your specific industry. 
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⁠⁠Learn more about eligible industries ->

Use of the SBA 7(a) Loan

In order to get approved for an SBA 7(a) loan, you’ll need to prove that your plans for the funds are appropriate.

While the specific allowable uses depend on the amount you want to borrow, you can generally use SBA 7(a) funds for operational expenses, refinancing certain high-cost debts, hiring employees, purchasing new inventory or equipment, supporting marketing costs, or even purchasing land and commercial real estate.

SBA 7(a) loans are never permitted to reimburse owners for equity, nor to repay delinquent taxes or funds that should be held in trust or escrow.
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⁠More about uses for the SBA 7(a) loan ->

Collateral Requirements

While the SBA guarantees a large percentage of an SBA 7(a) loan, your lender is still on the line for the remaining percent. The collateral you provide is split between the SBA and your lender. Offering collateral instills confidence in recovery should you default.

Generally, a lender prefers that you offer something like equipment, real estate, or other high-value assets which they could sell, if needed. If you’ve got sufficient cash flow, the SBA won’t be as concerned with collateral requirements. However, showing the SBA that you’re fully invested in the success of your business (which putting up collateral of your own goes a long way to prove) definitely increases your chances of approval and success. 

Personal Credit Requirements

While you’re requesting a loan for your small business, personal credit scores greatly impact your corporate creditworthiness. Paying your bills on time (even early) and holding back from overusing credit cards makes a huge difference.

You’ll be in the best position if you’ve got a personal credit score of 680 or higher — though having a lower score doesn’t immediately disqualify you — and your history shows no recent bankruptcies, tax liens, or foreclosures.

You’ll be evaluated based on your most recent business income tax return as well as three years of personal tax returns. The number of loan applications you’ve submitted in the past will either be a green light or a red flag.

Guidelines for Startups

Startups are generally seen as risky investments. After all, around 50% of small businesses fail within their first five years.

SBA 7(a) loans minimize the risk to lenders, so these lenders are more likely to give out startup loans that they would normally consider too risky.

Startups must meet the usual eligibility requirements for SBA 7(a) loan consideration, but since you won’t have cash flow history to prove your ability to repay the loan, you’ll need to prove both industry-specific and business management experience.

Your lender and the SBA will also heavily evaluate your business plan, since a track record for your business doesn’t exist. By offering collateral and even some of your own funds, you can convince your lender that your business has potential and you’re personally invested in its success.

Learn more about startup loans →

SBA 7(a) Application Process

The SBA 7(a) loan application includes three main parts: the 7(a) LGPC (Loan Guaranty Processing Center) Submission Cover Sheet, SBA Form(s) 1919, and SBA Form 1920. As the borrower, you’re only responsible for providing information for Form 1919.

The application contains many sections, some of which are your lender’s responsibility to fill out and submit:

1. SBA 7(a) Loan Application
2. Lender’s Credit Memorandum
3. Draft Authorization
4. Personal Information: Your Documentation
5. Other Processing Documents
6. Business and Affiliate Financial Statements
7. Supporting Documents

Today's SBA 7(a) Loan Terms

Below, you can find the current terms available for an SBA 7(a) loan. These are updated daily.

For rates across all SBA loan types, see the table below.

From the SBA 7(a) Loans Blog

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Saving Up a Down Payment for an SBA Loan
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How to Get Your SBA Loan Approved Faster
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SBA Loans for Plumbers
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Can You Use an SBA Loan to Buy an Online Business?
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