SBA 7(a) Eligibility Rules

The Gates, from SOP 50 10 8

Every change-of-ownership 7(a) loan has to clear each gate below. Miss one and the file stops, so the trap that most often fails each is named with it. To answer them against a specific deal, the Eligibility Pre-Check walks the same gates one at a time.

• A for-profit business operating in the United States

  The business must operate for profit, in the US or its territories. Passive investment and speculation do not qualify.

  Common trap: Real estate held for appreciation and businesses that mostly lend money are out, even when they look like Main Street.

  SBA SOP 50 10 8

• Small by SBA size standards

  The business must fit the size standard for its industry code. Nearly every Main Street target fits with room to spare.

  Common trap: Size counts affiliates: if you already own other companies, their revenue and headcount can aggregate with the target's.

  SBA size standards

• Every owner a US citizen or US national

  Since March 1, 2026, 100% of direct and indirect ownership must be held by US citizens or US nationals with a principal residence in the US.

  Common trap: This is the gate that changed: green-card holders were eligible owners until this year and are now ineligible persons. Older guides still say otherwise. Any ineligible co-investor, at any percentage, fails the whole application.

  SBA Procedural Notice 5000-876626

• Clean answers on the character questions

  SBA Form 1919 asks every owner about incarceration, parole, probation, and pending charges. Currently incarcerated, on parole or probation, or under indictment stops the file.

  Common trap: Old, resolved matters are usually workable with disclosure. The unworkable version is the undisclosed one the background check finds.

  SBA Form 1919

• No delinquent federal debt, no prior loss to the government

  Delinquent federal debt or a prior default that cost the government money (including a prior SBA loan) makes the applicant ineligible.

  Common trap: Defaulted federal student loans are the version of this that surprises buyers. Cure the delinquency before applying, not during.

  SBA SOP 50 10 8

• A real 10% equity injection

  A complete change of ownership requires an injection of at least 10% of total project costs. A seller note can satisfy at most half of it, and only on full standby (no payments at all) for the life of the loan.

  Common trap: A seller note with interest-only payments counts for nothing here. The standby has to be total, in writing, for the full term.

  SBA SOP 50 10 8

• Franchises: the brand is in the SBA Franchise Directory

  For any franchise, brand listing in the directory decides SBA eligibility. The directory came back on June 1, 2025 and is updated every other week.

  Common trap: Brands that missed recertification dropped off when the directory returned. Check the listing before the LOI, not during underwriting.

  SBA Franchise Directory

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