What Are The SBA Loan Qualifications For Borrowers In 2022

There are several specific SBA loan qualifications for borrowers to meet in 2022. Small Business Administration (SBA) financing is incredibly popular for flexible terms, relatively low loan interest rates, and high capital amounts. Of course, getting SBA loan approval is often more complex, challenging, and frustrating than other forms of financial support. Certainly, understanding the typical business loan terms, conditions, eligibility requirements, and qualifications is mission-critical for success. As a business owner yourself, this simple preparation could save you significant time and resources while growing your company. Read on to learn the common SBA loan qualifications for borrowers in 2022.

Meet Eligibility Requirements

To be considered for financing, borrowers must meet SBA loan eligibility qualifications. Eligible businesses need to operate for profit, income, and revenue. Additionally, their businesses must be limited to the United States of America, as well as its territories. The Small Business Administration also mandates businesses have actual owner equity that could be invested in. The SBA may even require you to invest alternative capital resources, such as personal savings or assets before you seek financial support. Certainly, borrowers must meet SBA loan eligibility requirements to get financing in 2022.

Have Acceptable Business And Personal Credit History

Next, there are specific SBA loan qualifications based on business and personal credit history. While the SBA may not specify a minimum business/personal credit score, it will require borrowers to maintain “acceptable” credit profiles. Of course, these restrictions may be imposed by private lenders. Commonly, these lenders require you to have a personal credit score of at least 680. As far as your business credit score, it will be based on your FICO SBSS score. For 7(a) loans, you’ll need a business credit score of 155. Definitely, business owners need acceptable business and personal credit to meet SBA loan qualifications.

Align With SBA Size Standards

Of course, SBA loan applicants also require you to align with mandated size standards. The Small Business Administration measures organizational size in three primary ways. For a start, they’ll examine the number of employees you have. Keep in mind this figure is heavily influenced by your current business industry. Next, they factor in your company revenue — again based on industry. On top of these factors, the SBA will also inquire about your business’s net worth. Most of the time, businesses only qualify as small if they earn less than $5 million annually, or hold a net worth of under $15 million. Certainly, align with size standards to meet all the necessary SBA loan terms and conditions.

Offer Collateral

Some SBA loan programs even require you to put up personal or business collateral. Think about what business or personal assets you are willing to offer up as a default guarantee. Typically, the SBA will accept real estate holdings like buildings, office space, or other commercial properties. In addition, they’ll likely recognize operational equipment, accounts receivable (AR), or even current inventory. Absolutely, you need to meet SBA loan collateral requirements to obtain adequate financing.

Demonstrate Acceptable Usage

Plus, SBA loan qualifications may even impose restrictions on funding usage. In short, you need to prove that your use of the funds will be appropriate — according to the Small Business Administration’s standards. Generally speaking, you can use lent capital to support operational expenses, refinance costly debts, or acquire new inventory. These funds can also be dedicated to advertising, hiring, recruitment, or equipment acquisition. If you are planning on using funds to repay delinquent taxes or reimburse equity, SBA funding may not be the best route. These uses are generally prohibited.

Before receiving financing, business owner borrowers need to meet several important SBA loan qualifications. For a start, you need to have acceptable business and personal credit. Next, you must meet the SBA’s eligibility requirements and size standards. Plus, you’ll have to demonstrate acceptable uses of the funds. Depending on your loan program, you may even be asked to put up personal or business collateral. Follow the points above to learn the common SBA loan qualifications for borrowers in 2022.