SBA Small Business Loan Eligibility Requirements


Posted: September 14th, 2011

Category: How To

Most small businesses are , subject to certain exceptions, eligible for an SBA loan. The specific rules regarding are found in a series of Standard Operating Procedures (SOPs) that the SBA has promulgated to guide SBA Lenders as well as in Title 13 Parts 120 and 121 of the Code of Federal Regulations. Although these rules govern what banks need to do when issuing and servicing SBA loans, they also contain the answer to the question, "Am I eligible for an SBA loan?

SBA Small Business Loan Eligibility Requirements

The following are some of the key requirements for an SBA loan:

  • The business must be a 'small business' by SBA's specific size standards The SBA has an entire set of rules dedicated to answer the size question which is measured either by annual revenues or number of employees, depending upon the type of business seeking the loan. The overwhelming majority of businesses in the U.S. will meet the SBA's small business standards.   
  • The business must be an operating business organized for profit, not a passive business (e.g.: rental properties like apartments, long stay mobile home parks, most executive suites, and parking lot businesses, etc.)
  • The small business being financed must be located in the United States (including territories and possessions)
  • If the loan is related to the purchase or refinance of real estate, the owner must occupy 51% of the building for their non-passive income business, the owner must meet occupancy requirements within one year of the loan closing.
  • You, and any other individuals that will make up the principals, must pass a criminal background review.
  • You cannot have defaulted on any government backed loan.
  • You must meet certain liquidity requirements. Mainly if borrowers have cash and other liquid assets in excess of a multiple of the requested loan amount they may not be eligible for an SBA loan unless they inject a portion of those funds into the project.

The SBA's guarantee programs have been successful in getting financing into the hands of countless worthy small business owners.  

Article written by BoeFly