SBA loans carry the most favourable terms available to a small business: lower rates, longer repayment, smaller down payments. They also carry the longest timeline and the most paperwork of anything in your lender tiers, and most packages that fail do so on preparation rather than on the business. This checklist follows the partner checklist lenders use. Work through it before your FundReadi Report moves SBA from the category to unlock next to the category you clear, and the application will be waiting for the business rather than the other way round.
Key takeaways
- Start 90 to 120 days before you need the capital, submit a complete package, and build the banking relationship 6 to 12 months ahead.
- Every owner at 20 percent or more is underwritten and signs an unlimited personal guarantee.
- Debt service coverage of 1.25 is the minimum and 1.35 to 1.50 is preferred; below 1.25 is the most common denial.
- 7a for flexibility, 504 for real estate and heavy equipment, Express for speed under $500K.
The three programs
- 7a. The versatile one. Up to $5 million for working capital, equipment or real estate. Flexible use of funds. 60 to 90 days from application to decision.
- 504. Fixed assets. Up to $15 million for commercial real estate and heavy equipment, at lower rates, repaid over 20 to 25 years. Up to 120 days.
- Express. The fast one. Up to $500,000 with streamlined documentation and a 21 to 30 day funding timeline. Loans up to $350,000 can be decided by the lender without a separate SBA review; $350,000 to $500,000 get an expedited SBA response.
How to choose: Express if you need under $500,000 and speed matters; 7a for flexibility and larger amounts; 504 for real estate or major equipment at the lowest rates. Most businesses start with 7a or Express.
Business eligibility
- A for-profit business operating in the United States.
- Small by SBA size standards, typically under 500 to 1,500 employees depending on your industry code. Size and revenue thresholds vary by industry, so verify your code before applying.
- A legitimate business need and the capacity to repay from cash flow.
- Meaningful owner equity already invested, typically 10 to 20 percent.
- Our partner book's category floor for SBA is 24 months in business and about $125,000 a year in revenue.
Owner eligibility
- Every owner at 20 percent or more is underwritten.
- The partner checklist lenders use puts the owner's personal score at 650 minimum with 680 or better preferred; our analysis treats 670 or higher on your strongest bureau, two or more years in business and $250K or more in annual revenue as the readiness signal.
- No bankruptcy within the past three years.
- No outstanding federal debt, tax liens or delinquent child support.
- U.S. citizenship or lawful permanent residence.
- Certain criminal convictions may rule an owner out.
- Willingness to sign an unlimited personal guarantee.
Every owner at 20 percent or more signs an unlimited personal guarantee. If the business defaults, the lender can pursue your home, vehicles, bank accounts and other personal assets. In community property states a spouse may also be required to sign. Decide this before you assemble a single document.
Documents, personal
For every owner at 20 percent or more:
- Personal financial statement on the SBA form.
- Three years of personal tax returns with all schedules.
- Government-issued photo ID.
- A resume or business background summary.
- Signed credit report authorization.
Documents, business
- Three years of business tax returns, where the business has them.
- Year-to-date profit and loss statement.
- Balance sheet dated within the last 90 days.
- Complete business debt schedule.
- Six to twelve months of business bank statements.
- Formation documents, licenses, permits and lease agreements.
- A business plan, with financial projections that show debt service coverage of 1.35 or higher.
Documents, real estate
If the loan buys property:
- Executed purchase agreement or letter of intent.
- Professional appraisal.
- Phase I environmental site assessment.
- Proof of the 10 to 20 percent down payment funds.
- Title commitment.
- Property insurance quote and zoning verification.
Documents, acquisition
If the loan buys a business:
- Signed purchase agreement with the seller.
- The seller's three years of business tax returns.
- Professional valuation or appraisal.
- Complete asset list with condition assessment.
- Purchase price allocation schedule.
- Non-compete agreement.
Transaction documents and professional review
- Detailed use-of-proceeds breakdown, vendor quotes or purchase agreements.
- Collateral identified with estimated values; equity injection source documented.
- Appraisals ordered or complete; environmental assessment ordered for real estate.
- Projections reviewed by a CPA, legal documents by an attorney, the business plan by an advisor or mentor.
- Every calculation checked, every form complete, every signature obtained.
The ratios lenders check
| Measure | Minimum | Preferred | If you miss it |
|---|---|---|---|
| Debt service coverage (cash flow over debt payments) | 1.25 | 1.35 to 1.50 or higher | Below 1.25 is a near-automatic denial |
| Debt to worth | 4 to 1 at most | 3 to 1 or better | Higher reads as over-leveraged |
| Current ratio (current assets over current liabilities) | 1.0 | 1.5 or higher | Below 1.0 reads as a liquidity concern |
| Working capital | Positive | 3 to 6 months of expenses | Negative raises viability concerns |
Equity injection
For 7a:
- Buying an existing business: 10 percent down at minimum.
- Starting a new business: 10 to 20 percent, varying with the lender's view of risk.
- Working capital loans: typically no down payment.
- The money must come from personal resources, never borrowed funds.
For 504:
- Owner-occupied commercial real estate: 10 percent down.
- Equipment: 15 to 20 percent.
- Special-purpose property: 20 percent.
- A business under two years old: 15 percent at minimum.
The timeline
Standard 7a runs 60 to 90 days. Plan for 90 to 120 where real estate or an acquisition is involved. Express runs 21 to 30 days for a straightforward file with complete documentation.
- Weeks 1 to 2: gather every document, finish the business plan, prepare current financials, talk to more than one lender.
- Weeks 3 to 4: submit the complete package; answer every follow-up request the same day.
- Weeks 5 to 8: underwriting, appraisals, site visit, environmental assessment, ratio analysis.
- Weeks 9 to 12: SBA review of the guarantee, with conditions to clear.
- Weeks 13 to 15: conditions satisfied, documents executed, funds disbursed.
Why packages are declined
- Debt service coverage below 1.25, the most common reason.
- Personal credit below the checklist's 650 line, recent late payments, unresolved collections.
- Inadequate equity injection, or a down payment that was borrowed.
- Insufficient collateral for the amount.
- Debt to worth above 4 to 1.
- A weak or unrealistic business plan with unsupported projections.
- Character issues: criminal history, bankruptcy within three years, outstanding tax liens.
- A high-risk industry: multi-level marketing, speculation, gambling, passive investment.
- Incomplete documentation, or information that does not match across documents.
- A prohibited use of funds.
Prohibited uses
Proceeds cannot go to: refinancing existing SBA debt except under specific criteria; repaying loans the owners made to their own company; passive investment where the borrower will not run daily operations; investment real estate (property must be at least 51 percent owner-occupied); multi-level marketing or pyramid sales; speculative land development or businesses without established revenue; lending or securities-investment operations; operations outside the United States and its territories; gambling enterprises; or any activity that is illegal under federal, state or local law, which includes marijuana businesses regardless of state law.
The lenders in the checklist
- Wells Fargo. The largest 7a lender by volume, with the strictest requirements among the majors and a 90 to 120 day timeline. Fits an established business with excellent credit and no time pressure.
- JPMorgan Chase. Second largest, at 60 to 75 days. Strongly prefers existing business banking customers; fits commercial real estate and larger loans.
- Live Oak Bank. An industry specialist in veterinary, dental, healthcare, self-storage and franchises, with an efficient online process.
- Celtic Bank. A technology-enabled platform working through brokers, at 45 to 60 days, for smaller loans and newer businesses; rates run slightly above the majors.
- SmartBiz. An online platform that shops one application across several lenders, with loans from $30,000.
- Bank of America. A top-five SBA lender with a strong online process; prefers loans of $250,000 or more with strong credit profiles, including franchise financing.
The principle
Start 90 to 120 days before you need the capital. Submit a complete package up front and answer document requests the same day. Reach debt service coverage of 1.35 or higher before you apply. Build the banking relationship 6 to 12 months in advance. Preparation is what shortens the timeline and improves the terms.
Open your funding stage to see whether SBA is a category you clear or the one to unlock next, and update your business questionnaire if your revenue or formation date has changed.
This piece is education, not financial or legal advice, and nothing in it is a lender's decision or a promise about your score or an application. Credit scores in the portal are VantageScore® 3.0.