5 Reasons You Can’t Get an SBA Loan

It’s no secret that SBA loans are a great deal. In fact, in fiscal year 2015 the SBA backed a record-setting $23.6 billion through the popular SBA Advantage Loan Program. With lower interest rates and longer repayment terms than most other small business loans, SBA loans are the best bet for small business owners looking to grow.

Aside from the great rates and terms, SBA loans are popular because the loan can be used in a variety of business-building ways. Proceeds from an SBA loan can be used for long-term working capital, to finance equipment purchases, to hire employees and more.

Since SBA loans are the gold standard and backed by the government, not everyone qualifies. Learn why you might get turned down for an SBA loan and some business loan tips on how you can get approved.

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Your Credit Score

Because an SBA loan is guaranteed by the government, they don’t want to take chances on borrowers with poor credit scores. Having a credit score of at least 680 can help you qualify and get lower interest rates. There are many resources available to learn more about the importance of credit scores. Search the SmartBiz Small Business Blog for “credit scores” to find informative posts about how scores are calculated and easy ways to raise yours.

You Defaulted on a Student Loan

The Small Business Administration requires that borrowers are current on all government loans to qualify for an SBA loans. Past defaulted government loans can disqualify borrowers, says Sean O’Malley, the co-founder of SmartBiz. “The SBA takes into account defaults on federally backed student loans, as well as government backed mortgages.”

You’re a Newbie

The SBA won’t grant loans to brand new businesses. At SmartBiz, our SBA loan qualifications require two years. Why? Those 24 months prove that you have steady revenues and give lenders an idea of how much money your small business takes in each year. This helps the SBA determine the likelihood that you’ll pay back your loan.

You’re in an Ineligible Industry

The Small Business Administration has clear rules about industries that can and can’t get approved for a loan. Before you spend time and energy on an application, make sure your business is good to go. Visit the SBA website for a list of ineligible businesses. Businesses that do not qualify include non-profit organizations.

You’re Reluctant to Personally Guarantee a Loan

When you are awarded an SBA loan, you are personally responsible for paying the loan back, even if the business shuts down or has other financial issues. If you don’t pay back the loan, a personal guarantee allows the lender to sell off your personal assets (e.g. a home or car) to satisfy the loan. If you don’t want to personally guarantee an SBA loan, then you won’t qualify. Some alternative lenders do not require personal guarantees but you’ll probably be unable to get the size of loan you’d like and the cost will be higher.

In Conclusion

It’s a smart strategy to research SBA lenders to determine borrower requirements before you get started. Be aware that all SBA loans are not created equal. Each lender has specific credit criteria on top of the SBA requirements. One SBA lender may say “no” and another “yes”. Strive to work with a lender that has an easy application process, fast funding and stellar customer support.


SmartBiz has worked with thousands of small business owners and receives rave reviews for our SBA loan process that is swift and smooth. If you’re looking for low-cost funds to expand and strengthen your business, find out in about 5 minutes if you’re pre-qualified on the SmartBiz website. We conduct a “soft pull” of credit so your score won’t be impacted. Save time, save money and get ready to grow!