The Small Business Administration (SBA) loan requirements determine your eligibility and are focused on the characteristics of you and your business. Borrowers need to operate small for-profit businesses located in the United States. Most businesses will qualify for an SBA loan with a 680 or higher credit score, a maximum debt-to-equity ratio of three or four times and a minimum debt service coverage ratio (DSCR) of 1.25 times.
If you’re considering an SBA loan, a great place to start is with SmartBiz. SmartBiz streamlines the application and lending process by partnering with top SBA lenders. The online prequalification process for loans up to $350,000 is quick and simple, takes only minutes to complete and eliminates the need for you to deal with complicated SBA forms.
How to Qualify Under the SBA Loan Requirements
Small U.S.-based for-profit businesses can qualify for SBA loans. The basic SBA 7a loan requirements generally match the other types of loans offered by the SBA. Businesses with good credit (680-plus credit score), debt-to-equity (three to four times maximum), cash flow (minimum 1.25 times DSCR) and management experience will typically qualify. You’ll provide collateral and a personal guarantee.
The basics on how to qualify for small business loan financing from the SBA generally include:
- Business size: Your business must be small, which generally means it has $750,000 to $38.5 million or less in annual revenue and fewer than 150 employees
- Credit score: 680-plus for all primary business owners (check your score for free)
- Time in business: 2-plus years or business and management experience plus other requirements for startup businesses; you need to show that you can manage and operate your business successfully
- Sufficient equity: Typically a maximum debt-to-equity ratio of 3 times for new businesses or 4 times for established businesses is acceptable; in other words, you need to have $1 in cash invested in your company for every $3 to $4 in loan funds
- Ability to repay: Your cash flow must be sufficient to cover all of your loans and other obligations with a cushion; a DSCR on your business of 1.25 times of better is generally considered sufficient to demonstrate your ability to repay your debt obligations
- Collateral & guarantees: While SBA loans do not necessarily need to be fully collateralized, it is easier to obtain financing with more collateral — both personal and business; the SBA will also require a personal guarantee from all owners who own 20 percent or more of the company
Sound like you? We recommend SmartBiz for the quickest and most streamlined SBA loan process. SmartBiz offers SBA working capital loans up to $350,000 and commercial real estate loans up to $5,000 with loan terms of 10 to 25 years and rates starting at 5.75 percent. The SmartBiz online loan application can have you prequalified minutes and funded in weeks.
Who is Eligible under the SBA Loan Requirements
To be eligible for SBA financing, you and your business must meet basic SBA loan requirements related to your characteristics and location. SBA loan eligibility is the same under the SBA 7a loan requirements as it is for the other types of loans offered by the SBA, such as SBA express loans.
To be eligible for SBA loan financing, your business must fall into these six categories:
1. Active & Eligible Passive Businesses
To be eligible for SBA financing, businesses generally need to be actively-managed operating companies. This is because the SBA wants the businesses it assists to be actively engaged in their business endeavors and the operation or their companies. However, it also provides financing to eligible passive businesses.
The following passive businesses are eligible for SBA financing:
- Hotels, motels, marinas, campgrounds, recreational vehicle (RV) parks & similar: In order to be eligible for SBA financing, at least 51 percent of your income must be generated by individuals who stay at your property less than 31 consecutive days, both on an actual and projected basis
- Licensed nursing homes & assisted living facilities: If your passive business owns a licensed nursing home or assisted living facility, you are eligible for SBA financing
- Lessors of equipment, household goods & other items: Passive businesses engaged in the leasing of equipment, household goods and other property are eligible for SBA financing; if your business is engaged in lending, you may be ineligible
- Hair salons, barber shops, nail salons & similar: These business types are eligible for SBA financing; this is true even if your business ownership is passive and regardless of whether you hire contract workers to provide the services or have employees on staff; the exception is if your business is simply serving as a developer or landlord, which are ineligible passive businesses
Eligible passive businesses are required to meet the following SBA loan requirements:
- Business size: The SBA loan requirements pertaining to business size apply to both the passive business and the operating company; a business is generally considered small if it has $750,000 to $38.5 million or less in annual revenue and fewer than 150 employees
- Use of proceeds: SBA loan requirements related to the use of proceeds apply to the operating company, just as if it obtained the loan directly from the SBA
- Lease requirements: All leases between your passive business and the operating company must be in writing and subordinated to the SBA’s interest in the collateral property; additionally:
- The lease amount cannot be more than the sum of the loan payment plus an amount sufficient to cover direct property holding expenses such as those related to insurance, maintenance and property taxes
- The remaining term of the lease needs be at least as long as the term of the loan, including any extension options, and can’t allow for a substitute tenant; as an example, if the term of the loan is 25 years, the remaining term of the lease — including extension options — must also be at least 25 years
- Assignment of rents: You will be required to sign an assignment of rents, which gives your lender and the SBA rights to the rental income derived from the property in the event of loan default; in essence, this is another form of collateral
- Guarantors & co-borrowers: The operating company is required to be a co-borrower or guarantor on the loan — a co-borrower per the SBA 7a loan requirements for working capital or the purchase of operating or intangible assets; anyone holding 20% or more ownership in your eligible passive business or the operating company must also guarantee the loan
2. For-profit Businesses
To qualify for SBA financing, your business must have a for-profit organizational structure. However, if your business is a for-profit subsidiary of a nonprofit organization, you may be eligible for SBA financing.
The following SBA loan requirements apply to for-profit subsidiaries of nonprofits:
- Business size: The nonprofit and for-profit businesses must be combined when determining eligibility under the SBA’s business size loan requirements; a business is generally considered small if it has $750,000 to $38.5 million or less in annual revenue and fewer than 150 employees
- Use of proceeds: The SBA loan proceeds can only be used to benefit the for-profit subsidiary
- Guarantors: The nonprofit organization must provide a loan guarantee if it owns at least 20 percent of the for-profit subsidiary
3. Businesses Located in the U.S. & Its Territories
A primary goal of the SBA is to help with the formation, development and growth of American businesses. As such, your business must be located in and primarily operate in the U.S. and its territories. The U.S. territories include American Samoa, Guam, Northern Marianas, Puerto Rico and U.S. Virgin Islands.
Additionally, your business must meet one of two criteria. First, you need to have authorization to operate in the location where you’re seeking assistance from the SBA. Alternatively, your business needs to significantly contribute to the economy of the U.S. by paying taxes, using American-made products or materials or employing American labor.
Other SBA loan requirements related to the location of your business include:
- International operations: If your business has international operations, you are only authorized to use the loan proceeds for your domestic operations, and both your business and its employees must be subject to local and federal taxes
- Trade restrictions: If your business is engaged in international trade, you are still subject to the trade restrictions of the U.S., even if you obtain SBA financing
4. Businesses Owned & Controlled by U.S. Citizens or Qualified Non-U.S. Citizen Owners
All business owners must be in the U.S. legally. If at least 49 percent of your business is owned and controlled by U.S. citizens, the non-U.S. citizen owners are in the country legally and the non-U.S. citizen owners have obtained an appropriate work visa, then you may be eligible for SBA financing.
All applicants are required to complete the SBA’s Form 1919 at the time of application. Your citizenship status is addressed in the form. If you are not a U.S. citizen, you will need to provide your SBA lender with U.S. Citizenship and Immigration Services (USCIS) documentation of your citizenship status when you apply, such as a copy of your lawful permanent resident (LPR) — green card — or visa.
Specific SBA loan requirements related to citizenship status are as follows:
Businesses owned by U.S. or naturalized citizens are eligible for SBA financing. There are no additional SBA loan requirements or restrictions on these businesses related to citizenship.
Lawful Permanent Residents
LPRs are individuals who have received permanent authorization to live and work in the U.S., which is documented via the issuance of a green card. Businesses owned by LPRs are eligible for financing per the SBA’s loan requirements, so long as the green card, as documented via USCIS Form I-551 or an acceptable substitute, is current when the application is submitted.
Non-immigrant — “documented” — aliens are individuals who have received temporary authorization to live and work in the U.S., such as through a non-immigrant visa. Businesses owned by the certain types of non-immigrant aliens may be eligible for SBA financing. The SBA will consider the period of stay authorized by the U.S. government compared to the SBA loan term when making the determination.
Businesses owned by the following non-immigrant alien types may be eligible for SBA financing:
- Individuals with extraordinary ability or achievement in the sciences, education, business or athletics (O-1A)
- Intracompany transferee executive or manager (L-1A)
- Intracompany transferee specialized knowledge (L-1B)
- Optional practical training (OPT for F-1 Students)
- Specialty occupations (H-1B)
- Temporary business visitor (B-1)
- Treaty investors (E-2)
Asylees & Refugees
Businesses owned by asylees and refugees with LPR status are eligible for SBA financing. The applicant must provide evidence of their immigration status. You’ll provide this evidence when you complete and submit SBA Form 1919.
Evidence of immigration status under the SBA loan requirements may include:
- Documentation noting asylee or refugee status (Form I-94 or Form I-94A)
- Unexpired employment authorization document (EAD, Form I-766)
- Expired EAD if accompanied by Form I-797C and lists the same authorized employment category as was included on the original EAD
Aliens Subject to IRCA
If you’re an illegal alien who has received temporary legal resident status under the Immigration Reform and Control Act of 1986 (IRCA), your business may be eligible for SBA financing. Businesses owned more than 20 percent by aliens with IRCA status are only eligible for SBA financing up to 5 years after the date that temporary status was granted. Cuban, Haitian, blind or disabled aliens with IRCA status are exempt from the 5-year limitation.
Foreign Entrepreneurs under the EB-5 Program
The EB-5 Immigrant Investor Program was created for foreign entrepreneurs who have made a qualified investment in a U.S. business. These entrepreneurs also need to have plans to permanently create or retain 10 full-time jobs for qualified workers in the U.S. Through this program, foreign entrepreneurs may be eligible to receive LPR status.
You may be able to obtain financing from the SBA while waiting to receive LPR status from the U.S. government if you hold an SBA-authorized non-immigrant visa or are an alien subject to IRCA. Your SBA lender can provide you with more information or answer questions if you’re uncertain about your status.
5. Meet the SBA’s Small Business Definition
To be eligible for SBA financing, your business needs to be small as defined by the SBA’s loan requirements. While it varies by industry, a business is generally considered small if it has $750,000 to $38.5 million or less in annual revenue and fewer than 150 employees. The SBA’s table of size standards assists business owners in identifying if their businesses are considered small.
6. Businesses Needing SBA Financing
The SBA loan requirements specify that businesses must have a demonstrated need for SBA financing and that credit must not be available to them elsewhere without causing the business an undue hardship. Your lender is required to certify to the SBA that you cannot get some or all of the funds you’ve requested from other nongovernment sources under reasonable terms without assistance from the SBA.
Who is Ineligible under the SBA Loan Requirements
When you get an SBA loan, the SBA guarantees that if something goes wrong with your loan, it will cover a portion of your lender’s losses. This means the SBA is taking on some of the loan risk. For this reason, it has developed a list of businesses it considers to be too high risk or where a potential conflict of interest may exist.
The following businesses are ineligible for financing under the SBA loan requirements:
1. Businesses with a Nonprofit Organizational Structure
The SBA loan requirements specify that businesses with a nonprofit organizational structure are not eligible for SBA financing. The exception to this rule is your business is a for-profit subsidiary of a non-profit organization.
2. Businesses Engaged in Lending
Businesses engaged in lending are not eligible for SBA financing. This includes banks, bail bond companies, factoring companies, financing companies, investment companies, life insurance companies — excludes independent agents — and any other business who trades money.
The engaged in lending exclusion of the SBA loan requirements does not apply to:
- Check cashing businesses: You are eligible for SBA financing if more than 50 percent of your gross revenue is generated through a check cashing service
- Customer financing: If your business regularly offers financing to your customers, but it represents less than 50 percent of your gross revenue, then you are eligible for SBA financing
- Financial advisors: If your business provides fee-based financial advice, you are eligible for SBA financing so long as you do not use the loan proceeds for your own investments
- Mortgage servicing companies: Your company is eligible for SBA financing if you primarily service mortgages or fund mortgages and sell them within 14 calendar days of loan closing; if you originate and hold mortgage loans in your portfolio, you are not eligible for SBA financing
- Pawn shops: If in the last year you generated more than 50 percent of your gross revenue by selling merchandise and not from loan interest, then you are eligible for financing from the SBA
3. Passive Businesses
Except for those companies deemed eligible by the SBA, passive businesses may not obtain financing from the SBA. This is because the SBA primarily provides financing to operating companies. It wants the businesses it assists to be actively engaged in their business endeavors, and so most passive businesses are excluded.
Ineligible passive businesses include the following:
- Apartment buildings: Businesses who own and operate apartment buildings are not eligible for SBA financing
- Cellphone tower, billboard, solar panel & wind turbine lessors: If your business generates revenue from leasing land for cellphone towers, billboards, solar panels or wind turbines, you are not eligible for SBA financing; however, if your company operates these business types on leased land, then you are eligible for financing
- Developers and landlords: If your business is primarily engaged in developing and leasing properties without actively using, operating, and occupying them you are not eligible for SBA financing
- Land developers: If the purpose of your business is to acquire, develop or subdivide land into lots for resale purposes, then you are not eligible for SBA financing
- Management company control: If the day-to-day operation of your business is handled by a third-party management company without owner involvement, then you are not eligible for SBA financing
- Mobile home parks: Businesses who own and operate mobile home parks are not eligible for SBA financing
4. Life Insurance Companies
Life insurance companies are not eligible for SBA financing. If you are an independent life insurance agent, you may be eligible for SBA financing if you maintain sufficient control and discretion of your business. This includes such factors as your ability to post a profit and incur a loss, responsibility for investing in and maintaining your own office, receiving payment through commissions and hiring employees.
5. Businesses Located in a Foreign Country
If your business is located in a foreign country, and you do not have any business activities in the U.S., then you are ineligible for SBA financing.
6. Businesses Owned by Illegal Aliens
If your business is owned in full or in part by illegal aliens, then the loan requirements deem you as ineligible for SBA financing.
7. Businesses Involved in Pyramid Schemes or Multilevel Marketing
Businesses engaged in multilevel marketing, multilevel distribution plans or pyramid distribution plans are not eligible for SBA financing.
8. Businesses Engaged in a Significant Amount of Legal Gambling
If your business generated more than one-third of your prior year gross revenue — including leasing income — from legal gambling activities like selling government-sanctioned lottery tickets — then you are not eligible for SBA financing. If you generated any of your gross revenue from parimutuel betting, operating a gambling casino or similar activities, you are not eligible for SBA financing.
9. Businesses Engaged in Illegal Activity
Businesses engaged in any type of illegal activity are ineligible for SBA financing. This includes activities legal at a state or local level, but illegal at a federal level. An example is the sale and distribution of marijuana. This restriction also applies to businesses that manufacture, distribute, service or sell items related to the illegal activity, unless you can prove there is no connection.
10. Private Clubs or Exclusive Membership Businesses
If your business is a private club or you offer an exclusive membership, then you are not eligible for SBA financing. An example of this is a woman-only gym or health club. This exclusion applies even if your business is part of a franchise.
11. Government-owned Entities
Businesses owned by the government, such as a municipality or a Native American tribe, are not eligible for SBA financing. As an example, a fire department or water district owned by a county or town are ineligible for SBA financing.
This exclusion does not apply to Native American-owned businesses when:
- The business is legally organized separately from the Native American tribe
- The Native American tribe waives sovereign immunity over the collateral or authorizes the U.S. federal court as the approved jurisdiction, and signs a “sue and be sued” clause
- The Native American tribe is recognized only by the state and not the U.S. government, which means it does not have sovereign immunity
12. Businesses Focused on the Promotion of Religion or Religious Beliefs
Businesses affiliated, associated or otherwise connected to a religious organization or where there is a religious component are not eligible for SBA financing. This doesn’t include businesses who sell religious books, music or other similar items. Your lender will work with you and the SBA to make this determination, which will include asking you questions to assist them with the completion of SBA Form 1971.
13. Businesses That Are Primarily Engaged in SBA Loan Packaging
If your business earns at least one-third of your gross revenue from packaging SBA loans, then you are ineligible for SBA financing.
14. Businesses Associated with an Individual of Questionable Character
Character is an important component of any lending decision. The SBA requires “good character” of anyone who owns 20 percent or more of your business, serves as a managing member, is a general partner, officer, director or trustor or is employed by your business and manages its day-to-day operations.
These business associates make your business ineligible for SBA financing if they are:
- In prison, on probation — including deferred probation — or on parole
- Subject to a current indictment, arraignment or any other form where criminal charges are brought forth to a jurisdiction
When you apply for a loan with the SBA, you and your associates will be required to complete SBA Form 1919. In some circumstances, your lender can seek a character determination from the SBA via SBA Form 912, which makes you eligible for SBA financing if approved.
15. Businesses Partially Owned by the Lender or CDC
If your lender or certified development company (CDC) has an equity interest in your business directly or indirectly, then you are not eligible for SBA financing. The only exception is if your business is financed by a small business investment company (SBIC), so long as certain requirements are met such as ensuring the SBA’s collateral position is ahead of the SBIC.
16. Businesses Selling Products or Services of a Sexual Nature
If your business presents performances of a sexual nature — live or recorded — or generates more than 5 percent of its gross annual revenue directly or indirectly from selling items, services or other items of a sexual nature, then it is not eligible for financing from the SBA.
17. Business Owners with a Prior or Current Default on a Federal Loan
Businesses that are delinquent — 90 days or more past due from the payment date — on any federal debt or with previous government loan defaults are not eligible for SBA financing. This includes student loan debt. It also includes losses on the sale of collateral like a short sale, debt settlement for less than the amount owed and bankruptcy of any borrowers or guarantors.
18. Businesses with Significant Political or Lobbying Activities
If your business generates more than 50 percent of your gross annual revenue from political activities or lobbying activities, you are not eligible for SBA financing.
19. Speculative Businesses
Businesses engaged in speculative activities are not eligible for SBA financing. Speculative businesses are those engaged in high-risk endeavors for the chance of making a high profit. Some examples of speculative businesses include stock trading, research and development activities and most speculative home building, although speculative home building is allowed under the SBA’s Builders CAPLine program.
SBA Loan Requirements on Use of Loan Proceeds
SBA loan requirements specify how businesses can use loan proceeds, which vary by SBA loan type. Your loan documentation will explain how you are authorized to use the loan proceeds. In general, businesses can only use SBA loan proceeds for legitimate and reasonable business purposes.
Eligible and ineligible uses of SBA loan proceeds per the SBA loan requirements are:
Eligible Use of SBA Loan Proceeds
The eligible use of loan proceeds varies for the types of loans offered by the SBA. As an example, the SBA 7a loan requirements allow for more flexibility in the use of SBA loan proceeds than the SBA 504 loan requirements. In the table below, an “X” indicates for which purpose the SBA loan proceeds may be used.
The eligible use of proceeds for common types of loans offered by the SBA are:
Eligible Use of Loan Proceeds: SBA 504, SBA Microloan & SBA 7a Loan Requirements
|Use of SBA Loan Proceeds|
|Land Acquisition (Purchase or Lease)|
|Land Site Improvements (1)|
|Existing Building(s) Purchase (2)|
|Existing Building(s) Renovation or Rehabilitation (2)|
|New Building(s) Construction (3)|
|Fixed Asset Purchase & Installation (4)|
|Refinance Existing Debt (5)|
Further detail on the use of SBA loan proceeds for some items footnoted in the table are:
- Land site improvements: Examples of site improvements include site preparation like grading, parking lots and landscaping. The SBA also allows you to use up to 5 percent of the loan proceeds to make improvements that are shared by the community, such as sidewalks.
- Existing building purchase, renovation or rehabilitation: The SBA allows your business to permanently lease up to 49 percent of the rentable square footage of existing buildings to unrelated, third-party tenants as long as you will permanently use and occupy at least 51 percent of the property’s rentable square footage.
- New building construction: The SBA allows businesses to permanently lease up to 20 percent of the rentable square footage and temporarily sublease up to 20 percent of the space to unrelated, third-party tenants. You need to permanently use and occupy at least 60 percent of the space. Further, you must plan to occupy all the subleased space within 10 years and some of the subleased space within 3 years.
- Fixed asset purchase & installation: For SBA 504 loans, fixed assets must be in a permanent location, with a useful life of at least 10 years. On a case-by-case basis, the SBA will provide short-term 504 fixed asset financing for the purchase of furniture, fixtures and equipment if it is an essential component of the overall project and small relative to the project size.
- Refinance existing debt: Loan proceeds cannot be used for refinancing of unsecured or undersecured loans, where the risk of loss is shifted to the SBA. Additionally, loan proceeds cannot be used to refinance debt that would have originally been ineligible for SBA financing and remains ineligible currently. Your lender will work with you to determine if the type of refinancing you are seeking meets the SBA loan requirements.
Ineligible Use of SBA Loan Proceeds
The SBA is providing your lender with a guarantee that it will cover a portion of the lender’s losses if something goes wrong with your loan. This means the SBA is taking on some of the risks. The SBA has deemed some loan proceed uses as ineligible per the SBA loan requirements based on the potential risk and because of possible conflicts of interest.
The SBA loan requirements don’t allow businesses to use loan proceeds for:
- Business relocation: You are not authorized to use SBA loan proceeds to relocate your business if it will result in a reduction in jobs of one-third or more or if it will result in a substantial increase in unemployment in the community in which your business is located; exceptions to this rule can be approved by the lender on a case-by-case basis
- Floor plan financing: Loan proceeds cannot be used finance retail inventory, such as vehicles
- Loans, payments or distributions to business associates: SBA loan proceeds cannot be used to make payments, loans or distributions to business associates unless it is to compensate them for services they performed for your business at market rate.
- Payments on past due local, state or federal taxes: You may not use loan proceeds to pay for past due taxes unless it is for payment on past due business income taxes where a prior payment arrangement has been approved by the IRS
- Real Estate or personal property held for investment purposes sale or lease: You may not use SBA loan proceeds to purchase property for the purpose of holding it for sale, lease or investment unless it is for an eligible passive business
- Refinancing new markets venture capital company (NMVCC) debt: You cannot use SBA loan proceeds to refinance existing NMVCC debt
- Refinancing small business investment company (SBIC) debt: You cannot use SBA loan proceeds to refinance existing SBIC debt
SBA Loan Terms
The SBA loan requirements on maximum loan terms vary by SBA loan type. However, the SBA 7a loan requirements provide the baseline for most of the types of loans. In general, the maximum SBA loan amount cannot exceed $5 million in aggregate across all loans to a single borrower and its affiliates. SBA 504 loans are an exception, given the lender or CDC partnership.
The maximum repayment terms under the SBA loan requirements are based on collateral type. While the repayment terms vary by loan type, the maximum repayment terms generally are 10 years for working capital and 25 years for commercial real estate. Maximum SBA loan rates are typically tied to a set percentage over the prime rate.
The following table provides an overview of the loan terms by SBA loan type:
SBA Loan Term Comparison
|Types of Loans|
Equipment: 10 years or useful life
Commercial real estate: 25 years
2.25% to 4.75%
Equipment: 10 years or useful life
Commercial real estate: 25 years
Line of credit: 10 years
4.5% to 6.5%
|SBA 7a Advantage|
Equipment: 10 years or useful life
Commercial real estate: 25 years
|SBA 504 Loan|
All other lines of credit: 10 years
2.25% to 4.75%
|SBA Export Loan|
|SBA Export Express|
Equipment: 10 years or useful life
Commercial real estate: 25 years
Line of credit: 7 years
4.5% to 6.5%
|SBA Disaster Loan|
Where to Find an SBA Loan
A common misconception is that the SBA issues loans. Instead, SBA loans are issued by traditional banks, credit unions, community development organizations, nonprofit institutions and online lenders. Some lenders make the process easier than others, such as online lenders who will help you get your paperwork in order.
If you don’t know the SBA loan qualifications and necessary steps, qualifying for an SBA loan can be difficult. To make it easier, we’ve developed a comprehensive SBA loan document checklist to assist with the application process. Also, check out our article on How to Apply for an SBA Loan for tips on how to get a small business loan from the SBA.
We recommend SmartBiz for the most streamlined SBA loan process without the need to deal with complicated SBA forms. SmartBiz offers SBA working capital loans up to $350,000 and commercial real estate loans up to $5 million, with loan terms of 10 to 25 years and rates starting at 5.75 percent. SmartBiz can have you prequalified online in minutes and funded in weeks.
SBA Loan Alternatives
If your business doesn’t meet the minimum SBA loan qualifications, then you can consider an alternative. The option that’s right for you will depend on your circumstances, how much financing you need, and how quickly you need to receive the funds.
Potential alternative funding sources if you don’t meet the SBA loan requirements are:
Business Line of Credit
A small business line of credit is a great alternative to an SBA loan if you’re in need of capital to prepare for unexpected expenses or want a line of credit to draw against. There is no need to go through the SBA loan requirements if this is your situation, and there are many options available.
Traditional Bank Loans
If you have good credit and cash flow as well as plenty of collateral or liquidity, a traditional bank loan could be a viable alternative if you do not meet the SBA loan requirements. Check out our article on How to Get a Small Business Loan in 3 Steps for ideas on types of traditional bank loans that might be available to you.
Alternative Business Loans
If you need to receive funds quickly, you may be able to receive a quick decision from an alternative lender. Further, alternative lenders often have more flexible credit terms, so you may be able to receive financing not otherwise available from either the SBA or a traditional bank.
Another option if you don’t meet the SBA loan requirements is to obtain a peer-to-peer (P2P) business loan. P2P business loans are great for established businesses looking to borrow no more than $500,000 and needing a term of fewer than 5 years.
SBA Loan Requirements Frequently Asked Questions (FAQs)
This article has provided a lot of information about the SBA loan qualifications and SBA loan requirements. However, some questions are asked more frequently than others, which we’ve tried to address here. If we haven’t answered your question, feel free to share it with us in the FitSmallBusiness forum, and we’ll provide an answer.
Here are some of the most frequently asked questions about the SBA loan requirements:
Can I Get an SBA Loan if I am a Canadian Citizen?
Financing options are available to non-U.S. citizens living in the U.S. legally. As a Canadian citizen, you may be eligible for SBA financing if you’re a non-immigrant (documented) alien of the U.S. and have received an eligible visa. You may also be eligible if you’ve received legal permanent resident status from the U.S.
Can I Get an SBA Loan if I Operate an Apartment Complex?
The SBA loan requirements do not allow for financing of apartment complexes and other passive businesses. However, certain other eligible passive businesses are eligible for SBA financing. While an SBA loan isn’t an option, there are alternative types of apartments loans you could consider to get the financing you need, including other government-backed loans.
Can I Get an SBA Loan if My Business Has International Operations?
If your business has international operations, you are only authorized to use the loan proceeds for your domestic operations. Additionally, both your business and its employees must be subject to local and federal taxes. For more information, refer to the Business Located in the United States and Its Territories section of this article.
The Bottom Line
The SBA loan requirements help identify small businesses eligible for SBA financing. While there are various types of loans offered, the SBA 7a loan requirements and those of the other SBA loan programs have similarities. Determining if you meet the SBA loan qualifications early in the process will save you time and eliminate potential frustration.
If you are ready to apply for an SBA loan, we recommend checking out SmartBiz. SmartBiz streamlines both the application and lending process by partnering with top SBA lenders. The online prequalification process for loans up to $350,000 is quick and simple, taking only minutes to complete. Get prequalified now.