SBA Loan Eligibility


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Below is a brief description of some basic eligibility requirements the SBA uses to determine whether or not a loan will be considered for a guaranty under the 7(a) loan program. 
Size Standards: : Small businesses must be independently owned and operated, not dominant in its field, and must meet employment and sales standards developed by the SBA. For example, wholesale businesses must not have more than 100 employees. Retail or service businesses must have average three-year annual sales of not more than $5 to $21 million. Manufacturing businesses should not have more than 500 employees, but in some circumstances, businesses up to 1,500 employees will be considered. Construction companies should have average three-year annual sales of not more than $7 to $17.5 million. Agricultural businesses must have less that $500,00 in annual sales. These are just some examples of the size limits determined by the SBA. If you are unsure whether or not your business would meet SBA size standards, contact your local agency at
Type of Business: Loan proceeds guaranteed by the SBA cannot be used for the following types of business activities:

  • Financing real property to be sold at a later date
  • Non-profit work
  • Gambling, speculation, lending or investment
  • Monopolies and businesses involved in pyramid schemes
  • Illegal business activities

Purpose of Loan: Financing may be obtained to establish a new business or to assist in operating, acquiring, or expanding an existing business. Below is a list of accepted uses for SBA loan proceeds:

  • To purchase land or buildings
  • To cover new construction or the conversion of an existing facility
  • For long term working capital such as the payment of accounts payable and/or the purchase of inventory
  • To refinance existing business debt that is not already structured with reasonable terms and conditions
  • For short-term working capital needs including seasonal financing, contract performance, construction financing, export production, and financing against existing inventory and receivables

Maturity: The rate at which SBA loans mature varies according to the economic life of the financed assets and the applicant's ability to repay the loan. All loans will be repaid over the shortest possible time period. The following is a list of maximum time periods, varying according to the loans purpose.

  • Working capital loans can take up to 7-10 years to mature
  • Fixed asset loans can take up to 10-25 years to mature
  • Building construction loans can take up to 25 years to mature

Interest Rates: the private lender negotiates Interest rates. They are tied to the prime rate and can be fixed or variable. The SBA has determined that rates on its guaranteed loans shall not exceed 2.25 percent over prime for loans shorter than seven years, and 2.75 percent over prime for loans longer than seven years. Lenders may charge a slightly higher interest rate for loans under $50,000. Most 7(a) loans are amortized using a variable rate.
Guaranty Fee: When the SBA agrees to guaranty a loan, the lender must pay SBA a guaranty fee. Usually, this fee is then passed on to the borrower who can repay the fee from the proceeds of the loan. The fee is based on the loan's maturity and the portion guaranteed by the SBA.

  • For loans with a 12 month or less maturity date, the fee is one-quarter of one percent of the guaranteed portion of the loan.
  • For loans with a maturity date greater than 12 months, the fee is three percent on the first $250,000 of the SBA's share, 3.5 percent on the next $250,000 of the SBA's share, and 3.875 percent on the final portion of the SBA's share

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