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SBA Guaranteed Loan Eligibility Requirements Made Simple

by Ryan Smith on May 12, 2019 (Updated: March 25, 2024)

Qualifying for a Small Business Administration (SBA) guaranteed loan requires the added first step of determining whether you and your company meet the SBA’s eligibility requirements.

Knowing whether you meet the eligibility requirements can be complicated but don’t worry, we’ve made it simple by listing common causes for individuals, businesses and use of proceeds to be deemed ineligible.

If you’d like to go deeper be our guest and complete the SBA Eligibility Questionnaire For Standard 7(a) Guaranty.

Save time and energy by determining whether you and your company meet the SBA’s eligibility requirements before applying.

After you read the following eligibility requirements, if you have additional questions or are interested in starting your loan application, visit thinksba.com/ready.

Ineligible Individuals

The following individuals are not eligible to obtain an SBA guaranteed loan:

  • Those who do not possess reasonable personal liquidity; such as cash, marketable securities or cash value of life insurance to inject the minimum equity percentage into the financing package.
  • Those who possess excess liquidity between 1 – 2x the total financing package which includes the aggregate outstanding commitment of SBA loan, owner’s injection and any other related financing.
  • Those who do not possess commensurate experience to promote the sound development or preserve the existence of the business.
  • Are currently incarcerated, on probation, on parole or have been indicted for a felony or a crime of moral turpitude.
  • Are illegal aliens

Ineligible Businesses

The following businesses are not eligible to obtain an SBA guaranteed loan:

  • Non-profits
  • Passive income business that holds real and/or personal property from which it receives rental income
  • Pyramid sale distribution plan or direct marketing consumer cooperatives
  • Organizations principally engaged in indoctrinating religious beliefs
  • Business primarily engaged in political or lobbying activities
  • Business whom derives more than one-third of gross annual revenue from legal gambling activities
  • Businesses possessing more than $15 million in tangible net worth or more than $5 million net profit for previous fiscal year.
  • Businesses operating outside of the United States regardless of ownership citizenship status

Ineligible Use of Proceeds

The following use of proceeds are not eligible to obtain an SBA guaranteed loan:

  • Repay delinquent IRS withholding taxes, sales taxes or similar funds held in trust
  • To provide or refinance funds used for payments, distributions, or loans to associates of the applicant, except payment of ordinary compensation for services rendered at a fair and reasonable rate
  • Refinance loan taken by the applicant that was not directly collateralized by the proposed use of proceeds

What’s The Verdict?

Most likely, you are eligible and are therefore ready to apply for an SBA guaranteed loan. It’s not time celebrate yet, there is still a lot more work ahead but don’t worry, we’re here to help every step of the way.

Let’s Get Started

If you are seeking capital to grow or start your business and you are located in the United States, employ United States citizens and are produce a product or provide a service that benefits the American public and enhances the public trust it’s time to get started.

Call us at (858) 762-2774 or apply online.

Category: SBA 7(a) Loan Program, Small Business LoansTag: SBA Guarantee Program, SBA Guidelines, Small Business Owners

About Ryan Smith

Ryan Smith is Principal and Founder of ThinkSBA®, and Creator of The My SBA Loan Pro Podcast. Ryan specializes in assisting business owners and entrepreneurs with obtaining financing to purchase owner occupied real estate, acquire a business or franchise, or buy out a partner. Ryan accomplishes this by leveraging over eighteen years experience inside two of America’s top financial institutions.

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