SBA loans are known for their low interest rates and long repayment terms, but the application process can be time-consuming and paperwork-heavy.
Before you start your application, it’s important to understand the factors that can disqualify you from an SBA loan.
We’ll begin with a short questionnaire to understand your business’s unique needs.
Once we identify your personalized matches, our team will guide you through the process.
1. Non-U.S. Citizen Ownership
Businesses owned partially by non-U.S. citizens used to be eligible for SBA loans if at least 51% was owned by a U.S. citizen or permanent resident. However, recent changes now require businesses to be 100% owned by U.S. citizens, nationals, or lawful permanent residents to qualify for an SBA loan.
Additionally, if you’re a U.S. citizen with a business outside the U.S., you cannot apply for an SBA loan as the business must be located within the United States.
2. Size of Business
The size of your business can disqualify you from an SBA loan based on the total number of employees or annual revenue. The SBA has specific industry-based size standards that determine eligibility. Check the chart provided by the SBA to see if your business meets the criteria.
3. Ineligible Business Types
Nonprofit organizations and certain other business types are ineligible for SBA loans. Make sure your business falls within the eligible categories to qualify for an SBA loan.
List of Ineligible Business Types
4. Excess Cash Reserves
You may be disqualified from an SBA loan if you have too much cash on hand, indicating that you can fund your business without the need for a loan.
If your personal financial statement shows significant liquid assets, you may not qualify for an SBA loan.
5. Business Age
The length of time your business has been operating can affect your eligibility for an SBA loan. Lenders typically look for established businesses with a track record of success.
According to Fundera by BW, the minimum qualifications for an SBA loan include a personal credit score of 690, annual revenue over $167,000, and at least two years in business.
6. Loan Purpose
Using the loan funds to pay off business taxes is not an eligible purpose for an SBA loan. Make sure your intended use of the funds aligns with the SBA’s guidelines.
Ineligible Use of Loan Proceeds
7. Legal Proceedings
If your business is involved in any ongoing litigation, including personal matters like divorce, you may be disqualified from an SBA loan. It’s best to wait until legal proceedings are resolved before applying for a loan.