Qualifying for a 7(a) loan is both easier and more complicated than you might think. Qualifications differ from bank to bank and also depend on the type and size of your loan request. Whether or not a 7(a) loan is a good option depends on those qualifications.

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How Hard is it to Get Approved for an SBA 7(a) Loan?

This depends on several factors, but generally, SBA 7(a) loans are easier to obtain approval for than conventional business loans. There are lower qualification requirements, which can make it a better loan option for some business owners.

What Are the 6 Business Eligibility Requirements for a 7(a) Loan?

While requirements can vary depending on several factors, generally, the following will need to be met:

  • Operate a for-profit business in the United States
  • Meet SBA size standards (under 500 employees for most industries or under $7.5 million annual revenue)
  • Be an eligible business type
    • Ineligible business types include non-profits, financial businesses that engage in lending, life insurance, and passive businesses such as landlords and life insurance, among others.
  • You are not able to obtain loans on reasonable terms from other sources
  • Good personal credit history
  • Show a reasonable ability to repay the loan with revenues from your business

What Credit Score Do You Need to Apply for an SBA 7(a) Loan?

This is different from bank to bank, and most loan requests don't rely solely on your credit score. Check with your bank to determine their minimum requirements for applying. The SBA does not have a minimum credit score requirement.

What Are the Income Requirements to Apply for an SBA 7(a) Loan?

This will also vary from bank to bank and depends on the size of the request, among other things. It's best to talk with your bank to determine requirements, which will help to give you the best odds of approval.

Documents Needed to Apply for an SBA 7(a) Loan

Other documents may be required, but normally you'll need to provide:

  • Business and personal tax returns from the last three years
  • Business financial statements, including profit & loss and balance sheets
  • Personal financial statement
  • Business plan for startups or expansions
  • List of current business debts (debt schedule)
  • Collateral details, if required

What Does the SBA 7(a) Loan Have to be Used For?

If approved, the 7(a) loan must be used for the reasons below, among others.

  • Short or long-term working capital
  • Buying, refinancing, or improving real estate and/or buildings
  • Purchasing a business or buying out a partner in an existing business
  • Refinancing current business debt
  • Buying and installing machinery and equipment
  • Purchasing furniture, fixtures, and supplies

Learn more about what you can use a 7(a) loan for in our article 8 Ways You Can Use an SBA 7(a) Loan for Your Business.

Tips for the Best Approval Odds

While every request is unique and will be looked at individually, there are some things you can do or show that will help improve the odds:

  • Strong cash flow is not reviewed for all SBA 7(a) requests, but it can help if the bank does look at it
  • Work with an SBA-preferred lender because they're experienced and can often process loans faster
  • Explain exactly what your business needs are, including why you need the money and how much, how long it will take to pay it back, the current financial health of your business, etc.
  • Reduce your debt-to-income ratio (pay down debt) if you can
  • Update your business plan in case it's requested as part of your application packet

WaFd Bank is Here to Help

Our knowledgeable business bankers are available to help you manage success and have the expertise to become a trusted advisor to you and your team. With products that grow with your business and comprehensive tools to seamlessly manage it all, WaFd Bank is built for business. After over 100 years, we know what it takes to help you succeed, from start to legacy. Visit your local branch or give us a call at 800-324-9375 to experience the difference WaFd Bank can make for you.

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Loans subject to credit approval; terms and conditions may apply.