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SBA 7a Loan Requirements

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SBA 7a Loan Requirements

Updated: October 20th, 2023

business loan application rejection reasons

The SBA 7a Loan Program is the most common loan program offered by the association. This loan type offers businesses a significant amount of flexibility and working capital to address a variety of expected and unexpected needs. During the 2021 fiscal year, the SBA guaranteed nearly 52,000 7a loans according to the Congressional Research Service. These loans offer small businesses solutions to help finance everyday problems or meet expansion goals. Due to the high desirability of these loans, there are specific SBA 7a loan requirements that businesses must meet in order to qualify. 

As a business owner or company leader, knowing the exact details surrounding the SBA 7a loan requirements is critical to your effort in submitting a successful application. Funding Circle works hand-in-hand with owners and operators to help lay out what eligibility requirements are currently being met and what outstanding documentation or criteria may be needed. As a lender, our goal is to help small businesses navigate their financial options, and find success in today’s competitive market. 

What Are The SBA 7a Loan Eligibility Requirements? 

In order to be eligible for an SBA 7a loan, businesses must: 

  • Operate for profit 
  • Be considered a small business, as defined by SBA 
  • Be engaged in, or propose to do business in, the United States or its possessions 
  • Have reasonable invested equity 
  • Use alternative financial resources, including personal assets, before seeking financial assistance 
  • Be able to demonstrate a need for a loan 
  • Use the funds for a sound business purpose 
  • Not be delinquent on any existing debt obligations to the U.S. government  

In addition, Funding Circle holds the eligibility requirements that: 

  • A business must be in operation for 2 years or longer 
  • Have a minimum annual revenue of at least $150,000 
  • Hold no current federal tax liens 
  • Minimum 650 FICO credit score(s) 

What Makes a Business Ineligible for an SBA 7a Loan? 

While SBA 7a loans are a highly desired financing option, several businesses cannot apply due to their line of work or industry. 

Reasons a company may be deemed ineligible include: 

  • Financial businesses mainly involved in lending, such as banks, finance companies, payday lenders, some leasing companies, and factors (pawn shops, although engaged in lending, may qualify in some circumstances)
  • Businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except when the property is leased to the business at zero profit for the property’s owners)
  • Life insurance companies
  • Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify)
  • Businesses engaged in pyramid sale distribution plans, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants (multi-level marketing)
  • Businesses deriving more than one-third of gross annual revenue from legal gambling activities
  • Businesses engaged in any illegal activity
  • Private clubs and businesses that limit the number of memberships for reasons other than capacity
  • Government-owned entities
  • Businesses principally engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs, whether in a religious or secular setting
  • Consumer and marketing cooperatives (producer cooperatives are eligible)
  • Loan packagers earning more than one-third of their gross annual revenue from packaging SBA loans
  • Businesses in which the lender or CDC, or any of its associates owns an equity interest
  • Businesses that present live performances of an indecent sexual nature or derive directly or indirectly more than 2.5 percent of gross revenue through the sale of products or services, or the presentation of any depictions or displays, of an indecent sexual nature
  • Businesses primarily engaged in political or lobbying activities
  • Speculative businesses (such as oil exploration)

SBA 7a loan requirements also look at historical factors involving the business and its owners. Specific past actions and dealings can cause a business to be no longer considered as a loan recipient. 

Those examples include: 

  • A business that caused the government to have incurred a loss related to a prior business debt
  • A business owned 20 percent or more by a person associated with a different business that caused the government to have incurred a loss related to a prior business debt
  • A business owned 20 percent or more by a person who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral depravity 

The SBA 7a Loan Requirements to Gather 

So you’ve determined your business is eligible, great! The next step is determining what exact SBA 7a loan requirements are necessary in order to complete an application. When working with us here at Funding Circle, we will need your loan package to consist of the following documentation and supplemental information in order to submit to the SBA for approval. 

Here is where organization and meticulous record-keeping comes in handy. The more accurate and comprehensive your documentation is, the faster the application process can process — as well as the increased likelihood of securing funding. 

SBA 7a Loan Requirements include: 

  • Borrower information form: Complete SBA Form 1919 and submit it to an SBA-participating lender
  • Background and financial statements: Complete both SBA Form 912 (statement of personal history) and SBA Form 413 (personal financial statement). These help SBA and other stakeholders assess your eligibility 
  • Business financial statements: Submit the following to help show your ability to repay a loan:
    • Profit and loss statement – Current within 180 days of your application. Also include supplementary schedules from the last three fiscal years
    • Projected financial statements – Include a detailed, one-year projection of income and finances and explain how you expect to achieve this projection 
  • Ownership and affiliations: Provide a list of names and addresses of any subsidiaries and affiliates, including concerns, in which you hold a controlling interest or that are otherwise connected to you 
  • Business license or certificate: Provide a copy of the original business license or certificate of doing business. If your small business is a corporation, stamp your corporate seal on the SBA loan application form 
  • Loan application history: Include records of any loans you may have applied for in the past 
  • Income tax returns: Include signed personal and business federal income tax returns of your business’s principals for the previous three years 
  • Resumes: Include personal resumes for each principal 
  • Business overview and history: Provide a history of the business and its challenges. Include an explanation of why you need the SBA loan and how it will help your business 
  • Business lease: Include a copy of your business lease, or a note from your landlord, with the terms of the proposed lease 

Next Steps For Meeting The SBA 7a Loan Requirements 

Now that’s a lot of information to digest, we get it. Numerous boxes need to be checked before you can even get to the application process. That’s why we’re here to help. Our dedicated team of loan advisors is here to walk you through the entire loan application life cycle, answering any questions you may have — and helping you hurdle any roadblocks. 

Meeting the SBA 7a loan requirements takes time and understanding of the loan regulations. Get in contact with us, and start your loan application today!


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