It’s well-known that whereas SBA loans provide low rates of interest and lengthy reimbursement phrases, they require a time-consuming and paperwork-heavy software course of.
Earlier than you dive into your software, you need to familiarize your self with this checklist of things that may routinely disqualify you from an SBA mortgage.
We’ll begin with a short questionnaire to higher perceive the distinctive wants of your enterprise.
As soon as we uncover your customized matches, our staff will seek the advice of you on the method shifting ahead.
1. Your small business is partially owned by a non-U.S. citizen.
Beforehand, companies partially owned by non-U.S. residents had been eligible for SBA loans — so long as at the least 51% of the enterprise was owned by a U.S. citizen or everlasting resident. However, within the first half of 2025, the Trump Administration made numerous adjustments to SBA mortgage pointers, together with requiring a enterprise to be 100% owned by U.S. residents, nationals or lawful everlasting residents to qualify.
Moreover, in case you’re a U.S. citizen however your enterprise is positioned abroad, then it doesn’t make sense so that you can transfer ahead with an SBA mortgage software. The SBA requires that your enterprise be inside america to be eligible for one in every of its mortgage applications.
2. You utilize too many individuals or generate an excessive amount of income.
This automated disqualification is likely one of the extra complicated ones to distill. The SBA has strict pointers for what classifies a enterprise as “small.” However the actual necessities fluctuate by business and rely upon both the overall variety of workers or the overall annual income. The SBA will get extremely granular with industries, assigning a numbered code to every and publishing a chart of small enterprise measurement requirements by business. Use the chart to find out whether or not your enterprise is routinely ineligible primarily based on its measurement.
3. You use a nonprofit, MLM or different ineligible enterprise.
Nonprofit companies high the SBA’s checklist of ineligible enterprise sorts. The entire checklist contains greater than a dozen completely different enterprise sorts which might be routinely disqualified from SBA loans. Some are these you may anticipate: companies partaking in unlawful actions, pyramid schemes, corporations working within the pornography business. However a number of extra enterprise sorts that make this checklist might shock you. See the dropdown under to find out if your enterprise falls beneath one of many ineligible classes.
Companies ineligible for an SBA mortgage
4. You have got an excessive amount of money readily available.
The precise language the SBA makes use of in its checklist of eligibility necessities is that you need to “not be capable of get hold of the specified credit score on affordable phrases from non-federal, non-state and non-local authorities sources.” That language is a bit imprecise and complicated, although.
Maybe a clearer manner to consider it’s that you just shouldn’t be capable of moderately get the credit score elsewhere. Your private liquid belongings are one key piece of this requirement. If the lender or the SBA determines out of your private monetary assertion included in your software that you’ve got the means to self-fund, then you definitely’ll be denied an SBA mortgage. So, if in case you have a spare $500,000 hanging out in an account someplace, and also you’re angling for a $100,000 SBA mortgage, you’re more likely to be denied.
5. You haven’t been in enterprise lengthy sufficient.
Usually, lenders look to 3 essential standards to find out your “creditworthiness”: time in enterprise, credit score rating and annual income. As a result of many various lenders — every with their very own qualification standards — subject SBA loans, it’s arduous to definitively state the minimal necessities wanted to qualify for an SBA mortgage.
SBA funding advisors at Fundera by NerdWallet, nevertheless, have shared the next basic qualification minimums:
Private credit score rating: 690
Annual income: greater than $167,000
Time in enterprise: greater than two years (want to produce two years of enterprise tax returns)
6. You propose to make use of the funds to repay enterprise taxes.
Just like the checklist of ineligible enterprise sorts, the SBA has a transparent checklist of functions for which you can’t use the mortgage proceeds. Verify the checklist within the dropdown under to see in case your deliberate use for the mortgage funds routinely disqualifies you.
Ineligible use of proceeds
7. You’re within the midst of divorce proceedings.
It might appear pretty apparent that you just’d be disqualified from a government-backed mortgage if your enterprise is presently engaged in litigation. What could also be much less apparent is that even litigation involving private issues — for instance, divorce — can put an SBA mortgage out of attain for you. So in case you’re actively in courtroom pursuing any private or enterprise matter, it’s finest to attend to use for an SBA mortgage till the litigation is closed.
8. You’ve beforehand defaulted on a government-backed mortgage.
In the event you’ve ever taken out a authorities mortgage previously and didn’t repay it, partly or in full, then you definitely received’t be accepted for an SBA mortgage.
9. You’ve filed for chapter 3 times.
Necessities round bankruptcies fluctuate by lender — some will think about your software in case you’ve filed as soon as, some in case you’ve filed as much as two instances, whereas others received’t think about a borrower with any bankruptcies of their historical past. However two bankruptcies is the max; three or extra routinely disqualify you from an SBA mortgage.
What in case you’re routinely disqualified from an SBA mortgage?
In the event you tick the field on any of those automated disqualifications, listed below are some subsequent steps to take to get the funding your small enterprise wants:
If your enterprise kind is ineligible for an SBA mortgage, think about different lending, which might open up an extended checklist of nonbank lenders and mortgage sorts with much less strict necessities.
In the event you’ve reached the tip of this checklist and none of those automated disqualifications apply to you and your small enterprise, then forge forward with confidence in making use of for an SBA mortgage. Use our library of SBA mortgage assets to get ready:
We’ll begin with a short questionnaire to higher perceive the distinctive wants of your enterprise.
As soon as we uncover your customized matches, our staff will seek the advice of you on the method shifting ahead.
