4 SBA Loan Requirements to Be Aware of

While an SBA loan is often the first funding option that business owners consider when they need extra capital, you might be surprised to hear that not everyone qualifies for them. The SBA will lend to businesses that might have trouble getting loans through other lenders, but their requirements are often stricter than other lending companies. Here are three requirements to be aware of with SBA loans.

1. Can’t Get Credit Through Other Sources
One of the most overlooked requirements for SBA loans is that you must not be able to get credit through other sources. You don’t necessarily have to apply for and be denied other funding options. However, your lender will need to show proof that no other financial options are available for you, whether due to your credit, time in business, or borrowing history.

2. Run a For-Profit Company in the United States
To get an SBA loan, you must run a for-profit, legally registered company that does business in the United States. However, some companies don’t qualify for loans through the SBA.

Here are some types of companies that can’t receive funding:

• Speculative companies
• Life insurance companies
• Businesses making most of their money through gambling
• Passive income businesses
• Lending companies
• Political or lobbying companies

It’s important to remember that your lender could have their own list of companies that can’t receive funding, so it’s essential to verify with them that your company qualifies before you apply.

3. Meet Background Qualifications
Your business isn’t the only thing your lender will look into. They’ll also ensure that you are worthy of receiving a loan. Your lender will verify your citizenship status, background, and criminal history. A criminal conviction on your record won’t automatically bar you from receiving a loan; the lender will simply scrutinize your application more than they would for someone without a criminal history. However, most lenders will deny you if you have a felony involving violence or dishonesty.

4. Meet Size Standards
Because the SBA only loans to small businesses, they will need to ensure your company meets the size standards. Your lender will check how many employees you have, your yearly revenue, and your business’s net worth. All of the measurements will be based on the standard for what industry your business is in.
An SBA loan is a valuable resource for most small companies. When you know the requirements ahead of time, you can better determine if their loans are a good fit for your company.