In 1953, the US government established the SBA after recognizing that well over 50% of all economic activity in the US occurs in small businesses. In 1961, to incentivize lenders to make loans to small businesses, they established the SBA loan guarantee program. If a business qualifies for an SBA loan, the SBA will typically guarantee 75% of the loan on your behalf to the lender. This incentivizes lenders to make small business loans, that without this guarantee they would not otherwise do.
The Small Business Administration (SBA) has set up eligibility criteria for companies wishing to pursue an SBA loan.
The article below covers the eligibility requirements set by the SBA.
If you are a small business owner considering an SBA loan, our loan packaging experts at Business Funding Group LLC (BFG) can walk you through eligibility to see if the loan program could be the answer.
Businesses must have an operating company located in the United Stated that is owned 51% or more by a United States Citizen or Lawful Permanent Resident (LPR) or green card holder.
The business cannot be involved in any illegal activities, nor can it discriminate or exclude groups or people based on anything other than capacity or have discriminatory hiring practices.
If your business, or any owners, have caused a prior loss to the government, by for example defaulting on a previous SBA loan, or have delinquent federal debt, you will have to come to an agreement of repayment.
Businesses can also not be or engaged in the following activities:
– Lending
– Developers or landlords
– Life insurance companies
– Pyramid schemes
– Gambling
– Sexual nature
– Political or lobbying activities
– Speculative
There is a lot of information regarding SBA sizing requirements, and it can be confusing.
But relax, because per the SBA’s published FAQ’s from July 2024: 99.9% of businesses in the US are considered small.
There are some exceptions, but the SBA sizing requirements can generally be determined in two ways:
Industries are categorized by their NACIS and a business’s size is usually determined by two factors:
– Number of employees
– Annual revenue
The SBA also considers affiliate businesses when determining the size of a company.
The definition of an affiliate can be complex, but in general terms, if the applicant business or any of its owners (with more than 20% ownership) owns more than 50% of another entity, that entity may be considered an affiliate.
If you are unsure if your business meets the sizing requirements, please give us a call and we will assist!
Creditworthiness is based on both the business’s credit score and reports as well as the owner’s personal credit scores.
Regarding repayment ability is mainly based on a business’s cash flow, but also take into consideration how long a business has been in operations and what the collateral is available to secure the loan.
Read more about creditworthiness and ability to repay here.
Establishing if your business meets SBA loan eligibility can be difficult on your own, so let us our our decades of experience to good use.
At BFG, we have decades of experience with the SBA loan programs and are deeply familiar with what is needed to meet SBA requirements.
Call us today to get the process started!
In a short amount of time, you could be securing the financing your business needs to meet your business and financial goals.
(917) 593-5013