What disqualifies a business from SBA 7(a)?

Common disqualifiers: (1) failing SBA size standard for the NAICS, varies by industry but typically <500 employees or <$8.5-43M revenue. (2) ineligible business types, passive RE investment, lending, life insurance, multi-level marketing, gambling, religious organizations, governmental, businesses owned by non-citizens (with exceptions), illegal businesses. (3) personal credit issues, recent bankruptcy, federal-debt default, character issues. (4) inadequate equity injection (typically 10% required). (5) franchise not on SBA Franchise Directory or with non-SBA-compliant FDD.

What's the SBA 7(a) size standard?

Size standards vary by NAICS code. Common manufacturing (NAICS 31-33): typically <500-1,500 employees. Retail (NAICS 44-45): typically <$8.5M revenue avg over trailing 3 years. Wholesale (NAICS 42): typically <100-250 employees. Construction (NAICS 23): typically <$45M revenue. Professional services (NAICS 54): varies $8.5-22M. The SBA Size Standards Tool at sba.gov/size-standards gives exact thresholds by 6-digit NAICS.

Can I use SBA 7(a) for working capital?

Yes, SBA 7(a) is one of the few SBA programs that funds working capital. Up to 10-year term on working capital, $5M maximum. Use cases: payroll bridging, inventory + raw materials purchasing, AR cycle bridging, marketing + sales expansion. SBA 7(a) Working Capital + 7(a) Equipment Loan + 504 Real Estate stack is a common institutional manufacturer structure. SBA 504 does NOT fund working capital, that's the key differentiator.

SBA 7(a) Eligibility Quick Check | Free Tool

Status

Incomplete, 7 required questions unanswered

0 / 7 required criteria met

1. Is the business for-profit and operating in the U.S.?

SBA 7(a) requires for-profit U.S. businesses. Non-profits, foreign-only operations, and governmental entities are ineligible.

2. Does the business pass the SBA size standard for its NAICS code?

Size standards vary by NAICS, typically <500-1,500 employees or <$8.5-45M revenue. Check exact threshold at sba.gov/size-standards.

3. Does the borrower have acceptable credit (typically 660+ FICO, no recent bankruptcy)?

Most SBA-preferred lenders require 660+ FICO. Recent bankruptcy (within 3-7 years) typically disqualifies. Federal debt defaults disqualify until cured.

4. Can the borrower contribute 10% borrower equity injection?

SBA 7(a) typically requires 10% borrower equity for acquisitions. Sometimes 5% on existing-business acquisitions; 15-20% on special-purpose or startup.

5. Are 51%+ of owners U.S. citizens or LPRs?

SBA requires 51%+ ownership by U.S. citizens or Lawful Permanent Residents. Some specific exceptions apply for green-card holders.

6. Is the business an ELIGIBLE type (not passive RE, not lending, not gambling, not adult entertainment)?

Ineligible: passive real estate investment, lending, life insurance, multi-level marketing, gambling, adult entertainment, religious orgs, illegal businesses.

7. Is the use of funds eligible (RE acquisition, equipment, working capital, business acquisition, refinance)?

SBA 7(a) eligible uses: real estate (51%+ owner-occupied), equipment, working capital, business acquisition, debt refinance, expansion. NOT eligible: passive investment, speculative ventures, lending to others.

8. IF franchise, is the franchise on the SBA Franchise Directory with a compliant FDD?

Skip if not a franchise deal. If franchise: SBA Franchise Directory listing + SBA-compliant FDD required. Most major franchises listed; smaller franchises may need SBA review (4-8 week wait).

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Why This Quick Check Matters

SBA 7(a) declines are damaging, they go on file with the SBA-preferred-lender network and can affect future submissions. The most common decline reasons are predictable AT THE LOI STAGE if you screen for them. Pre-screening for these 8 criteria avoids 80%+ of late-process declines.

Edge cases not covered by this quick check: SBA Franchise Directory review timing for non-listed franchises, character review for borrowers with prior business failures, IRS lien subordination process, and special-purpose property equity escalations (15-20% on hotels / gas stations / car washes). PeerSense covers these in pre-clearance before formal lender submission.