SBA Loan Requirements: Credit Scores | SBA 7(a) Loans (2024)

FAQs

SBA Loan Requirements: Credit Scores | SBA 7(a) Loans? ›

It can be difficult to get an SBA 7(a) loan if you don't have strong annual revenue, a good credit score (690+) and at least two years in business. SBA 7(a) loan requirements vary from lender to lender, but you'll generally need to meet these criteria to qualify.

It can be difficult to get an SBA 7(a) loan if you don't have strong annual revenue, a good credit score (690+) and at least two years in business. SBA 7(a) loan requirements vary from lender to lender, but you'll generally need to meet these criteria to qualify.

Percentage of guaranty

For most 7(a) loan programs, SBA guarantees up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. However, SBA provides a 50% guaranty on SBA Express loans.

SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.

Eligibility requirements

Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding. The lender will provide you with a full list of eligibility requirements for your loan.

The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.

Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.

Even if you meet the SBA's requirements, each lender sets credit score, time in business, and revenue requirements. So, either the SBA or the lender can deny the application if the requirements aren't met.

Do you need collateral for SBA 7a? ›

7(a) Small loans exclude: Standard 7(a) loans, SBA Express, Export Express, CAPLines, Export Working Capital Program (EWCP), and Pilot Program loans. For loans $50,000 or less: SBA does not require collateral, except for International Trade loans, which have different requirements.

The SBA generally doesn't offer 100 percent forgiveness on 7(a) and 504 loans, no matter how dire your finances are. However, for companies that have had to cease operations, the SBA will consider settlements that have been agreed to between a borrower and their loan issuer.

The bottom line. Getting an SBA loan requires that you provide either a personal guarantee, collateral or both. This means your business assets or personal wealth may be at risk if the business defaults on the loan.

For the SBA 7(a), this means a minimum credit score of approximately 640. But you'll increase your chances to be approved for an SBA loan with a minimum credit score of 680 or higher.

Most lenders will require a minimum FICO score of 620 or higher for their SBA Loans.

While there's no official required SBA loan minimum credit score from the Small Business Administration, lenders will often set minimum credit score requirements for both personal and business. An SBSS of 140 to 160+ or a personal score of 620 to 640+ are commonly needed to qualify.

Is SBA 7(a) a line of credit? No, the standard SBA 7(a) loan is a business term loan, which means you get a set amount of money upfront, then make repayments plus interest over time. However, the CAPLine program technically falls under the larger umbrella of 7(a) loans.