SBA Loan Requirements: Things You’ll Need To Qualify

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SBA Loan Requirements: Things You’ll Need To Qualify

SBA Loan Requirements - Things You'll Need To Qualify

If you’re a small business owner in need of financing, Small Business Administration (SBA) loans can be a viable option. SBA loans offer favorable terms and lower down payment requirements compared to traditional bank loans. However, it’s important to understand the requirements and eligibility criteria to increase your chances of qualifying for an SBA loan. Here are the key points you need to know about SBA loan requirements:

Business Size

To qualify for an SBA loan, your business must meet the SBA’s definition of a small business. This definition varies by industry and is based on factors such as annual revenue, number of employees, and net worth. It’s essential to determine if your business falls within the size standards set by the SBA for your specific industry.

Business Type and Legal Structure

SBA loans are available to various types of businesses, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. However, certain types of businesses may have additional requirements or restrictions. For example, businesses involved in speculative activities or lending, pyramid sales, or gambling may be ineligible for SBA loans.

Personal Credit Score

Your personal credit score plays a significant role in SBA loan qualification. Lenders will evaluate your credit history to assess your ability to manage debt and make timely payments. While there is no minimum credit score requirement set by the SBA, a strong credit score, typically above 680, improves your chances of approval and may lead to more favorable loan terms.

Business Credit History

In addition to your personal credit score, lenders will also consider your business’s credit history. If your business has an established credit profile, lenders will review its payment history, outstanding debts, and credit utilization. Building and maintaining a positive business credit history can enhance your eligibility for an SBA loan.

Financial Statements

Lenders require comprehensive financial statements to assess your business’s financial health and repayment ability. These statements typically include your balance sheet, income statement, and cash flow statement. The financial statements should be prepared in accordance with generally accepted accounting principles (GAAP) and provide a clear overview of your business’s financial performance.

Business Plan

A well-developed business plan is crucial when applying for an SBA loan. Your business plan should outline your company’s objectives, market analysis, competitive landscape, marketing strategies, and financial projections. It demonstrates your understanding of your industry and your ability to generate revenue and repay the loan. A strong and compelling business plan can significantly impact your chances of securing an SBA loan.


SBA loans typically need collateral to secure the funding. These assets may be personal, real estate, or business-related. The SBA may also ask for personal guarantees from the business owners, which would hold them personally responsible for loan repayment in the event that the company is unable to do so. Personal guarantees and collateral support the interests of the lenders.

Down Payment

SBA loans typically require a down payment or owner’s equity injection. The down payment percentage can vary depending on the loan program and purpose. For example, the SBA 7(a) loan program may require a down payment ranging from 10% to 20% of the total loan amount. It’s important to assess your ability to provide the required down payment when considering an SBA loan.

Use of Loan Proceeds

SBA loans have specific guidelines regarding the use of loan proceeds. While they offer flexibility, it’s important to understand that funds must be used for legitimate business purposes outlined in your loan application. Common uses include working capital, equipment purchase, real estate acquisition, debt refinancing, or business expansion.

Understanding the SBA loan requirements is essential for small business owners seeking financing. Meeting these requirements increases your chances of qualifying for an SBA loan and accessing the capital needed to grow your business. Remember to assess your business size, credit score, and financial statements, and ensure you have a well-prepared business plan and collateral if required. By meeting these criteria, you’ll be better positioned to navigate the SBA loan application process and secure the funding necessary for your business’s success.


Mark J. Kane is a successful entrepreneur spending the last 16 years lending money to business owners. Beginning his career as a psychologist, at the age of 23 he became the youngest Hospital Admin running a 100+ bed facility. He built two businesses to over 500 employees and a business from scratch to over $18M in revenue in 18 months before selling. This experience led him to begin Sunwise Capital.

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