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How does the SBA review Business Loans and Lines of Credit?

The SBA will review an 8(a) Applicants business loans and lines of credit in great detail.

Here are eight items the SBA looks at:

  1. Have you provided copies of all business loans, promissory notes and lines of credit agreements?
  2. Are all pages of the agreements provided?
  3. Are all signatures on the agreements?
  4. If you have a line of credit, is it exhausted? If not, how much credit is available?
  5. Is there enough remaining on the line of credit to finance the business operations?
    You must typically have at least 90 days’ worth of working capital to sustain the operations of the business.
  6. Is there a guarantor on the line of credit or loan agreements other than the 8(a) Applicant?
    If so, does this individual have the ability to give them power to exercise control over the firm?
    If the 8(a) Applicant is a guarantor and one of the other key individuals identified within your business are guarantors there will be no issue. If someone other than the 8(a) Applicant is the sole guarantor, this will be an issue.
  7. Are the terms of the loans or line of credit problematic?
    For example – Do the loan or line of credit agreements contain payable on demand clauses, short repayment terms, high interest rates, burdensome collateral requirements? If so, this will be an issue.
  8. If there are shareholder, member, officer or partner loans to or from the business, are these loans reflected on the appropriate individuals Personal Financial Statement within certify.sba.gov?
    You must ensure that you factor these shareholder loan amounts into the 8(a) Applicants Adjusted Net Worth to see if the result would cause them to be considered not economically disadvantaged.
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