SBA Loan Requirements: The 7(a) Eligibility Checklist, Explained
According to the SBA, a business has to meet seven conditions to be eligible for 7(a) loan assistance, from being an operating, for-profit U.S. business to being creditworthy and able to repay. Here is each one in plain English, plus who you actually apply through and what to do if you do not fit.
By States Funding Team · Published
A quick word on who is writing this
States Funding is not a lender, and it is not an SBA lender. It runs a platform that matches U.S. small and medium businesses with funding offers from independent third-party lenders, and those lenders originate and service the financing and decide approval, rates and terms. States Funding does not make, guarantee or speed up SBA loans. Every SBA rule on this page comes from the SBA’s own website, linked in the sources at the bottom, so you can check the wording yourself. You can read more about how States Funding works on the home page.
The SBA’s 7(a) checklist, line by line
The SBA lists seven things a business must be or do to be eligible for 7(a) loan assistance. The first column below is the SBA’s requirement. The second is a step you can take on your own before you talk to anyone. The third is a question to bring to the lender, because the lender is the one who applies these rules to your file.
| # | SBA requirement | Your own check | Ask the lender |
|---|---|---|---|
| 1 | Be an operating business | Is the business open and running today, or is it still a plan on paper? | “How will you confirm that my business is operating?” |
| 2 | Operate for profit | Is the business set up to earn a profit, rather than organized as a nonprofit? | “Does anything about how my business is organized raise a question here?” |
| 3 | Be located in the U.S. | Where is the business located, and where does it actually operate? | “What will you look at to confirm where my business is located?” |
| 4 | Be small under SBA size requirements | Look up the SBA size standard for your industry on SBA.gov and note where you think you land. | “Which size standard applies to my industry, and how will you measure my business against it?” |
| 5 | Not be a type of ineligible business | Write down in one line what your business does to earn its income. | “Is my line of business one the SBA treats as ineligible?” |
| 6 | Not be able to get the desired credit on reasonable terms from non-federal, non-state and non-local government sources | List where you have already asked for financing and what you heard back. | “How will you look at and document my other credit options?” |
| 7 | Be creditworthy and show a reasonable ability to repay | Sketch a monthly budget that shows the new payment next to your current bills. | “What will you review to judge my creditworthiness and ability to repay?” |
Two of these deserve a second read. Number six: the SBA’s list says a 7(a) business must not be able to get the credit it wants on reasonable terms from sources other than federal, state and local government. Number seven is the reminder that a government program is still a loan that has to be repaid, and that the business has to be creditworthy. Ask the lender how it handles both before you spend hours on paperwork.
The wider SBA picture: income, ownership and location
The 7(a) list is not the only place the SBA talks about eligibility. On its general loans page, the SBA says lenders and loan programs each have their own eligibility requirements. In general, it says, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. The SBA adds that businesses normally must meet SBA size standards, be able to repay, and have a sound business purpose.
That last phrase is worth turning into homework. Before you contact a lender, write one short paragraph that says what the money is for, how much you need, and how the business will pay it back. If you cannot write that paragraph yet, that is useful to know too.
Same SBA, three different doors
“An SBA loan” is easy to think of as one product, but the SBA’s own pages describe different programs that you reach through different kinds of organizations. None of them is the SBA itself handing you money.
7(a)
Through a local lender
The SBA says you apply directly through a local lender and always work with the lender, not with the SBA. It also says the application contents vary with the size of the loan and the lender’s processing method. The SBA lists the 7(a) maximum as $5 million, which is a program ceiling, not what any one business will get.
504
Through a CDC
According to the SBA, 504 loans are available only through Certified Development Companies (CDCs). If a 504 loan is what you want, the first job is finding a CDC and asking what it needs from you.
Microloan
Through an intermediary
The SBA says microloans come from intermediary lenders and go up to $50,000, to help small businesses and certain not-for-profit childcare centers start up and expand. It puts the average microloan at about $13,000.
States Funding is none of these. It is not an SBA lender, a CDC, an SBA microloan intermediary or the SBA’s own lender matching tool, and SBA loans are not among the products offered through its network.
Your pre-call worksheet
Whichever door you choose, these steps make the first conversation shorter and more useful:
- Write your purpose paragraph: what the money is for, the amount, and how you will repay it.
- Note when the business started operating and how it is organized.
- Look up your industry’s SBA size standard and keep a copy of what you found.
- List every place you have already asked for credit and the answer you got.
- Gather your recent bank statements and whatever financial records you keep, then ask the lender which documents it will actually need.
- Ask how long the lender’s process usually takes for a loan your size, and plan around a range, not a promise.
What to do if you do not fit
Not fitting the SBA checklist does not end the search. Match your situation to a next step:
- The business is not operating yet. The SBA describes microloans as helping small businesses start up and expand, so an SBA microloan intermediary may be the place to ask.
- You can get reasonable credit elsewhere. The SBA’s own list says 7(a) is for businesses that cannot get the credit they want on reasonable terms from non-government sources. If you can, that non-government option is the one to compare.
- You want to compare non-SBA offers. Offers through the States Funding lender network cover business lines of credit, small business term loans, revenue-based financing, invoice financing and non-dilutive capital.
If you go the non-SBA route, know the typical floors up front. States Funding’s About page lists about 6 months in business and $10K or more in monthly revenue as typical floors to apply, and its FAQ lists a 500+ FICO score as part of the typical floor for its small business loan and revenue-based financing products. These are floors, not approval criteria. Meeting them does not mean you will get an offer, because the lenders decide.
Applying and comparing offers through States Funding uses a soft credit pull only, with no impact to your credit score. Only the final acceptance step requires a brief credit unlock for the lender, and lenders may run their own checks before funding. It costs $0 to apply through States Funding, with no obligation to accept an offer, and States Funding does not guarantee that an application will result in an offer or that funding will close within any particular timeframe. Any offer is non-binding until you electronically sign a funding agreement directly with the lender, and that agreement governs the loan, fees and repayment.
Two related guides can help. If you are applying through an LLC, read business loans for LLC owners for the questions to ask about personal credit and guarantees. If an agreement mentions collateral, read what a UCC filing is before you sign.
Sources
This guide is general information for U.S. business owners, not financial, legal or tax advice. States Funding is not a lender. Loans, advances and other financing products are originated and serviced by independent partner lenders, and States Funding does not guarantee that any application will result in an offer. Any examples are illustrative. The actual lender written terms govern any offer you receive.