SBA loan eligibility requirements are the baseline business, financial, and program criteria lenders evaluate when determining whether a small business may be eligible for an SBA loan program. These requirements are established by the U.S. Small Business Administration (SBA) and interpreted by participating SBA-approved lenders, which may apply additional underwriting standards.

Quick summary.

  • SBA loan eligibility is based on program rules set by the U.S. Small Business Administration and applied by participating lenders. 
  • SBA program rules are typically updated on an as-needed basis rather than on a fixed schedule.
  • Lenders commonly evaluate business eligibility, financial health, credit profile and intended use of funds.
  • Meeting eligibility requirements does not guarantee loan approval.
  • Eligibility criteria and documentation expectations may vary by SBA loan program and lender.

Important note about this guide.

This guide is designed to help small business owners understand the general eligibility requirements SBA lenders commonly evaluate when reviewing SBA loan applications. While the SBA establishes baseline program rules, participating lenders may apply additional criteria based on the SBA loan program and the businesses' financial profile. 

Meeting these eligibility requirements covered in this guide does not guarantee approval, and standards may vary by lender and SBA loan type.

Because SBA loan eligibility requirements are updated periodically by the U.S. Small Business Administration, this page is reviewed and updated as new SBA guidance or program changes are released.

Core SBA loan eligibility requirements.

SBA lenders evaluate several core eligibility factors to determine whether a business is eligible for SBA-backed financing. While specific documentation and underwriting expectations can vary by lender and loan program, these categories represent the baseline eligibility considerations across SBA 7(a) and 504 loan programs.

These core eligibility requirements apply across SBA 7(a) and SBA 504 loan programs and are outlined in the SBA’s Standard Operating Procedure (SOP) 50 10 - Lender and Development Company Loan Programs. While individual SBA loan programs may have additional program-specific criteria, all SBA approved lenders evaluate eligibility for the SBA 7(a) and SBA 504 loan programs from this shared framework.

Business eligibility and operating requirements.

Under SBA rules, an eligible business must meet all of the following operational criteria:

  • Be an operating business. There are some exemptions for Eligible Passive Companies (EPCs), according to the use of the loan proceeds.
  • Operate as a for-profit business that is legally registered and operating in compliance with applicable laws. 
  • Be located in, primarily operating in the United States. If the business operates internationally, the loan proceeds can only be used for U.S. operations.
  • Be authorized to do business in the state or territory where applying for a loan. 
  • Meet the SBA’s definition of a small business, based on either industry-specific size standards or SBA alternative size standards. 

Use of loan proceeds

SBA loans have specific requirements around how funds may be used. To remain eligible, loan proceeds must be applied to allowable business purposes under SBA program guidelines.

Across SBA loan programs, eligible use of funds generally include:

  • Acquiring, leasing or improving land
  • Purchasing, converting, expanding, or renovating existing buildings
  • Constructing new buildings
  • Buying or leasing equipment or machinery

Lenders review the intended use of funds as part of the eligibility determination to confirm alignment with SBA rules. Uses of funds that fall outside SBA-eligible purposes may disqualify a loan from SBA backing. In addition, some programs, like the SBA 7(a) program, allow for more flexible use of funds, such as working capital, inventory, or business acquisition.

Industry eligibility and restricted activities.

The SBA restricts certain industries, business types, and activities from participating in SBA loan programs. Businesses that fall into these listed categories are generally not eligible for SBA financing.

A business is typically ineligible if it is:

  • A nonprofit organization or government-owned entity.
  • A lender or business engaged primarily in loan packaging, lending, investing, or financing
  • An apartment building, mobile home park, or non-medical residential facility.
  • A developer or landlord whose primary activity is leasing land or buildings.
  • Engaged in the production or sale of marijuana products, except for qualifying hemp products that meet federal definitions.
  • A religious organization, such as a church, synagogue, or mosque.
  • A business that restricts patronage for reasons other than capacity (for example, a women’s-only health club)

Additionally, businesses are not eligible if they engage in activities such as:

  • Political or lobbying activities
  • Gambling
  • Illegal activities
  • Live adult performances or businesses involving prurient sexual content
  • Pyramid or multi-level sales distribution plans

Some limited exceptions may apply under SBA rules, but these categories are generally excluded from SBA loan eligibility.

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Ownership, citizenship, and character requirements.

SBA eligibility rules require lenders to evaluate the ownership and character of individuals involved in the business to ensure accountability and compliance with federal standards.

To be eligible:

  • As of the date of publication, all direct and indirect owners and guarantors must be:
    • U.S. citizens
    • U.S. nationals, or
    • Lawful permanent residents (“green card holders”)
  • A business is ineligible if any owner or guarantor is considered to be an “Ineligible Person”, including:
    • Foreign nationals
    • Asylum seekers or refugees
    • Visa holders or nonimmigrant aliens
    • DACA recipients

Upcoming change to SBA citizenship eligibility (effective March 2026)

The SBA has announced an update to its citizenship eligibility rules that will change owner and guarantor eligibility requirements for SBA loans.

Under SBA guidance (Policy Notice 5000-876441), SBA rules will require that 100% of all direct and indirect owners of a small business applicant be: U.S citizens or U.S. nationals, and have their principal residence in the United States, its territories, or possessions. Under this update, Legal Permanent Residents (“green card holders”) will no longer be eligible to hold any ownership interest in an SBA loan applicant, operating company (OC), or eligible passive company (EPC).

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In addition, SBA rules require that:

  • No owner may be incarcerated, on parole or probation, or under indictment for a felony or a crime involving moral turpitude
  • The business must be current on all government debt obligations, including prior SBA loans
    The business must not have defaulted on federal debt that resulted in a loss to the government
  • The business must be current on all federal, state, and local taxes, with required tax filings completed

Failure to meet these requirements generally disqualifies a business from SBA loan eligibility.

“Credit elsewhere” requirement.

SBA loans are subject to the SBA’s Credit Elsewhere requirement, which limits SBA financing to situations where comparable credit is not available on reasonable commercial terms from non-government sources. 

Under SBA rules, lenders must determine and certify that some or all of the requested financing is not reasonably available from:

  • Conventional lenders or other non-government sources
  • Personal liquidity of owners with 20% or more equity, including spouses and minor children. Certain personal funds may be excluded, such as reasonable reserves for medical, educational, or retirement needs.

Lenders must also document specific factors demonstrating credit weakness. Credit scores alone may not be used as the sole basis for determining whether credit is available elsewhere.

Financial capacity and repayment ability requirements.

Demonstrating the ability to repay the loan is a required component of SBA eligibility. SBA rules require lenders to assess whether the business has sufficient financial capacity to support loan repayment while maintaining ongoing operations.

This evaluation typically includes:

  • Review of historical or projected revenue
  • Existing debt obligations
  • Credit history of owners, and when applicable, the business
  • Overall cash flow sufficiency

While the SBA does not set universal financial thresholds, lenders must document repayment ability as part of every SBA loan evaluation.

SBA program-specific eligibility considerations.

While SBA 7(a) and SBA 504 loan programs share the same core eligibility framework, each program includes additional eligibility criteria and underwriting considerations based on how the loan is designed to be used.

The most common SBA loan programs differ in the types of businesses they serve, how loan proceeds may be used, and how lenders evaluate readiness beyond baseline eligibility.

SBA 7(a) loan eligibility considerations.

SBA 7(a) loans are the SBA’s most flexible program and are commonly used for working capital, equipment, business acquisition, and refinancing eligible debt.

In addition to core SBA eligibility requirements, lenders may evaluate:

  • How loan proceeds will be used within 7(a) eligible purposes
  • Business cash flow relative to requested loan terms
  • Owner involvement and management structure
  • Collateral availability, where applicable

To learn more about the SBA 7(a) loan program, including program-specific requirements, read our guide to the SBA 7(a) loan program.

SBA 504 loan eligibility considerations.

SBA 504 loans are designed for long-term financing of fixed assets, such as commercial real estate or major equipment.

Beyond core eligibility requirements, SBA 504 eligibility typically depends on:

  • Use of proceeds tied to eligible fixed assets
  • Job creation or public policy goals
  • Project structure involving a Certified Development Company (CDC)

To learn more about the SBA 504 loan program, including program-specific requirements, read our guide to the SBA 504 loan program.

SBA Microloan eligibility considerations.

SBA Microloans are administered by nonprofit, community-based lenders and are intended for smaller financing needs.

In addition to SBA baseline eligibility, Microloan programs may place greater emphasis on:

  • Business readiness and operational stability
  • Borrower experience and management capacity
  • Technical assistance or training participation

To learn more about the SBA Microloan program, including program-specific requirements, read our guide to the SBA Microloan program.

Eligibility vs. approval: Understanding the difference.

Meeting SBA loan eligibility requirements means a business meets the baseline criteria established by the U.S. Small Business Administration to be considered for SBA-backed financing. It does not mean a loan is approved or guaranteed.

After eligibility is established, SBA-approved lenders still evaluate additional factors, which may include:

  • Loan structure and repayment terms
  • Risk assessment and underwriting analysis
  • Program-specific requirements
  • Lender-specific credit and documentation standards

Approval decisions are made by individual lenders, not the SBA, and may vary even when two businesses meet the same eligibility requirements.

Insurance requirements (when applicable).

There are several cases where insurance may be required for an SBA loan, depending on collateral, loan structure, or business characteristics. These are typically addressed during underwriting or as a condition of loan approval.

The most common insurance requirement for SBA loans is hazard insurance when using commercial property or assets as collateral for your loan. These assets must be insured in the event of damage or loss. Learn more about SBA hazard insurance requirements here. 

In other cases, the SBA may require life insurance, particularly for sole proprietors, if the business is heavily reliant on one individual. In cases where the business has employees, proof of workers compensation coverage is frequently required.

You can learn more about the types of business insurance available in our guide, or explore a small business insurance quote with Lendio’s partner The Hartford to secure coverage that meets SBA insurance requirements. 

Explore a Begin a small business insurance quote with the Hartford now.

Sources

Related resources

  • SBA 7(a) Loan Program
     Learn how the SBA’s most flexible loan program works, including program-specific eligibility requirements, allowable uses of funds, and underwriting considerations.
  • SBA 504 Loan Program
     Explore eligibility requirements and project structure for SBA 504 loans, which are designed for long-term financing of commercial real estate and major equipment.
  • SBA Microloan Program
     Understand how SBA Microloans differ from other SBA programs and how nonprofit lenders evaluate eligibility and readiness for smaller loan amounts.
  • SBA Hazard Insurance Requirements
     Learn when insurance may be required as part of an SBA loan and how insurance requirements are applied during underwriting or as a condition of approval.
  • How to Apply for an SBA Loan
     Get an overview of the SBA loan process, including what lenders evaluate after eligibility is established and how approval decisions are made.

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This content may include information sourced from Lendio or other third parties. The Hartford does not control, endorse, or guarantee the accuracy or completeness of third‑party information, including SBA loan requirements, hazard‑insurance obligations, or lender criteria, which are subject to change. The material is provided for educational purposes only and does not constitute legal, lending, regulatory, or tax advice. Businesses should consult their own advisors or the SBA for guidance specific to their circumstances.

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