SBA SOP 50 10 7.1, for the people who package.
The rules that decide whether your file is eligible, how much it can borrow and what the lender must document, in the order you will meet them.
Eligibility and size
The applicant must be a for-profit operating business located in the US, meet the size standard for its NAICS code or the alternative size standard ($20M tangible net worth and $6.5M average net income), and not be an ineligible business type such as a passive investor, lender, or speculative enterprise. Size is measured including affiliates.
Affiliation
Under 13 CFR 121.301, businesses are affiliates when one controls or has the power to control the other, or a third party controls both. Control arises from ownership of more than 50%, from a minority block when no other holder is larger, from the power to block ordinary actions, from management overlap and from identity of interest among close relatives. Every affiliate's size counts, and every affiliate with debt appears in global cash flow.
- 1Does any person or entity own more than 50%?
- 2If no, is there a minority holder larger than all others?
- 3Can a minority holder block ordinary actions?
- 4Do officers or directors overlap?
- 5Do close relatives own related businesses?
Equity injection
A change of ownership requires a minimum 10% injection of total project cost. Cash must be verified with two months of statements. Seller debt on full standby for the life of the loan may count toward injection; partial standby may count up to half of the requirement. Start-ups and expansions are evaluated on the lender's credit policy.
Credit elsewhere
The lender must document why the applicant cannot obtain the loan on reasonable terms without a federal guaranty. Acceptable reasons include collateral shortfall, term requirements beyond conventional policy, and industry or start-up characteristics. The narrative must be specific to the borrower.
Global cash flow and DSCR
The lender must analyze the business's ability to repay from cash flow, with a minimum 1.15x coverage on the proposed debt. Global analysis adds guarantor household income and obligations and affiliate cash flow. Most preferred lenders underwrite to 1.25x global.
Open the DSCR calculatorCollateral
Loans over $50,000 must be secured to the extent available. A loan is fully secured when collateral value equals the loan amount; the lender takes available assets but may not decline solely for insufficient collateral. Personal real estate of 20%+ owners may be required when business collateral is inadequate.
Guaranty fees and agent fees
Upfront guaranty fees scale with the guaranteed portion and maturity, and annual service fees apply. Agent compensation must be disclosed on Form 159, and packaging fees above $2,500 require itemization.
Required forms
Form 1919 for the business and principals, Form 413 for guarantors, Form 1920 by the lender, Form 159 for agents, IRS 4506-C for transcript verification, and Form 912 where a character question is answered yes.
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