SBA BASICS
To qualify for most SBA 7(a) loans, owners with 20% or more ownership must be either U.S. citizens or hold this immigration status.
Lawful permanent resident (green card holder)
This SBA form summarizes a buyer’s assets, liabilities, income, and net worth.
SBA Form 413 (Personal Financial Statement)
This financial ratio measures whether a business generates enough income to cover its debt payments.
Debt Service Coverage Ratio (DSCR)
Underwriters review this factor to determine whether the buyer has the skills or background necessary to successfully operate the business.
Management or Operational Experience.
This is the maximum SBA loan possible for a non-construction company.
$5M
This is the typical minimum percentage of equity a buyer must inject for an SBA business acquisition loan.
About 10%
This type of credit inquiry is often used during early pre-qualification and does not affect a borrower’s credit score.
Soft Credit Pull
These two financial documents are typically the first ones lenders review to evaluate a business’s performance.
Tax Returns and a Profit and Loss Statement
These adjustments remove discretionary or one-time expenses to calculate true business cash flow.
Add-Backs
A ROBS (Rollover Business Startups) transaction for buying a business must be set up using this type of corporation, since it allows retirement funds to purchase shares.
C-Corp
This SBA loan program is the most commonly used for small business acquisitions.
SBA 7(a)
Owners above this ownership percentage must personally guarantee an SBA loan.
0%
This risk occurs when a single customer represents a large percentage of the company’s revenue.
Customer Concentration Risk
This type of analysis combines business cash flow with the buyer’s personal obligations.
Global Cash Flow Analysis
In an SBA 7(a) loan, seller financing can usually cover this share of the buyer’s required equity injection.
~50% (but does vary bank to bank)
Banks in this program can approve SBA loans internally without waiting for SBA authorization.
Preferred Lender Program (PLP)
Lenders require this documentation to confirm the buyer has funds available for the equity injection.
Proof of Funds
Most SBA lenders prefer to see this approximate minimum DSCR level before approving a loan.
About 1.25x
This report confirms the market value of real estate used as loan collateral.
An appraisal.
This type of business is generally ineligible for SBA financing due to its nature.
Passive investment businesses, lending companies, life insurance companies (any acceptable answer).
This program requires a CDC to qualify a loan:
504 Loan Program
Beyond finances, lenders review these two factors to evaluate whether a buyer can run the business successfully. Name at least one of them.
Creditworthiness and/ or Management Experience
During business pre-qualification, lenders review this financial statement to understand what the business owns, what it owes, and its overall financial position at a point in time.
The Balance Sheet
This underwriting technique evaluates whether a deal still works if revenue declines.
Stress Testing.
In the SBA 7(a) program, this type of seller financing—where no principal or interest is paid for a set period—can count toward a buyer’s equity injection.
Full Standby.