SBA 7(a) Paperwork Explained: SBA Form 413
SBA Form 413 is the applicant’s personal financial statement -- in other words, it's the part where your lender and the SBA hold a microscope to your financial history! In seriousness, this form helps the SBA qualify the applicant for the loan by getting a better picture of the applicant’s creditworthiness and ability to repay the loan. This is done primarily by examining your net worth. The information on this form will also help the SBA determine your debt service coverage ratio, helping the administration to determine how large a loan to guarantee, and the terms of the loan.
Here's the official form:
What Paperwork Do I Need?
In addition to completing the questions on Form 413, you’ll need to gather all paperwork up to the “as of” date on the form to support the information you give about the value of your assets and liabilities. Keep in mind that your “as of” date will be the last day of the last full month you’re providing supporting documentation for.
As a rule of thumb, your supporting documentation will probably include:
- Bank account statements
- IRA, 401(k), and other retirement account statements
- Life insurance statements showing current cash value
- Investment documents showing current value
- Pay stub
- Statements for other income (like pensions)
- Loan statements (such as mortgages, credit cards, and auto loans)
While you won’t submit these documents with Form 413, your lender will need to see them when they complete the “due diligence” portion of the loan processing.
Who should complete the form?
Any person who has ownership in the small business seeking the SBA loan should fill out the form. This includes:
- Each proprietor
- All general partners
- Any managing member of a limited liability company (LLC)
- Each owner of 20% or more of the equity of the Applicant (including the assets of the owner’s spouse and any minor children)
- Any person providing a guaranty on the loan
- If you’re married and file taxes jointly, you’ll put your spouse’s name on the form. This doesn’t make your spouse a loan guarantor, but indicates that the assets and liabilities on the form are owned jointly by you and your spouse.
How will the SBA determine my net worth?
SBA Form 413 requires the applicant to list their assets and liabilities, which they'll weigh to determine your total net worth.
Assets may include:
- Cash on Hand & in banks
- Savings Accounts
- IRA or Other Retirement Accounts
- Accounts & Notes Receivable
- Life Insurance – Cash Surrender Value Only (this is only applicable to whole life insurance policies – not term policies)
- Stocks and Bonds
- Real Estate
- Automobiles (You can use the Kelley Blue Book to help you estimate value)
- Other Personal Property
- Other Assets
Liabilities may include:
- Accounts Payable (refers to items regularly purchased on credit, but not using credit cards or personal lines of credit)
- Notes Payable to Banks and Others
- Installment Account (Auto – and include monthly payments)
- Other Installment Account (include monthly payments)
- Loan(s) Against Life Insurance
- Mortgages on Real Estate
- Unpaid Taxes
- Other Liabilities
- The form also requires dollar amounts for contingent liabilities, including:
- Any debt for which the applicant serves as Endorser or Co-Maker
- Legal Claims & Judgments
- Provision for Federal Income Tax
- Other Special Debt
What income information will I need to supply?
SBA Form 413 requires the applicant to supply information about sources of income including salary, net investment income, real estate income, and other sources of income (which you’ll need to explain).
What about debts?
Section 2 of Form 413 provides space for the applicant to list all notes payable to banks (or any others). For each note, the applicant must list the name and address of the noteholder, original balance, current balance, payment amount, frequency of payments, and how the note is secured or endorsed. If collateral is involved, you should list the type of collateral.
The form provides space for five notes, but if you have more, you’ll need to list them (with all pertinent information) on a separate sheet. Each separate sheet should be clearly labeled as part of Section 2 of Form 413 and signed.
What about my stocks and bonds?
For every stock or bond owned, the applicant should include information like the name of the security, how many shares are owned, how much they cost, the market value quotation or exchange, the date of the quotation or exchange, and the total value of the security.
The form provides space for four securities, but if you have more, you’ll need to list them (with all pertinent information) on a separate sheet. Each separate sheet should be clearly labeled as part of Section 3 of Form 413 and signed.
What if I own real estate?
If you own real estate, you’ll need to provide the SBA with information about each piece of property. The information you’ll need to provide includes:
- Type of Real Estate (such as primary residence or rental property)
- Date purchased
- Original cost
- Current market value
- Name and address of mortgage holder
- Mortgage account number
- Mortgage balance
- Amount of payment (per moth or year)
- Status of mortgage (e.g. “current,” “in foreclosure,” or “paid in full” if the mortgage has been paid off but is still showing up on your credit report)
The form provides space for three pieces of property, but if you have more, you’ll need to list them (with all pertinent information) on a separate sheet. Each separate sheet should be clearly labeled as part of Section 4 of Form 413 and signed.
What about property or assets that don’t fit into the form categories?
If you have any personal property or assets that don’t fit neatly into the other categories in the form, you’ll describe them in Section 5 of the form. This category includes your personal property that has significant value, including jewelry, antiques, and electronics. If any of these valuables have been used as collateral in other loans, include information about the lien and lien holder.
What about liabilities that don’t fit into the form categories?
Section 7 of the form provides space for the applicant to describe any liabilities they have that don’t fit into the other categories in the form. These liabilities may include debts from private agreements or outstanding lawsuits. Describe these debts in as much detail as you can, including amounts, payments, and terms.
What if I have unpaid taxes?
If you have Federal unpaid taxes, you will not be eligible for the SBA loan until the debt is resolved. However, you may be eligible if you have state or local unpaid taxes. In this section, you’ll need to describe the unpaid tax in detail, including type, to whom they’re owed, when they’re due, the amount, and any property a tax lien is attached to.
What about life insurance?
The last section on the form 413 requires you to describe any life insurance you hold. This should include information like the name of the insurance company, beneficiaries, face amount and cash surrender value of the policies.