Applying for a Small Business Administration (SBA) loan can be exciting and nerve-wracking at the same time. Eligibility requirements can be easily found on any lender’s website, but there are reasons why your business could be disqualified from an SBA loan.
The most common disqualifiers include poor credit, not meeting the minimum length of operation as a business, and defaulting on a previous government loan.
However, here are four unconventional reasons why your business could be disqualified from an SBA loan:
You’re not considered a small business.
The SBA has a strict definition of what is considered a “small” business for every industry. If you bring in more revenue and employ more people than what is listed by the SBA, you will not be considered for an SBA loan.
Filed for bankruptcy three times.
Some lenders will still take your application if you’ve filed for bankruptcy up to two times. While decisions vary by lender, it is very uncommon for a lender to approve a loan when the applicant has three or more bankruptcies.
You’re in the middle of getting divorced.
Because you are tied to your business, any personal litigation matters can prevent you from being approved for a loan. If you are currently getting divorced, make sure settlement agreements are met and documented before applying for an SBA loan.
Your business is an ineligible business.
Since SBA loans are backed by the federal government; if there is a conflict of interest in industries or it’s difficult to pinpoint a single proprietor for a business, you will not be considered an SBA loan.
Ineligible businesses include:
- Gambling
- Adult entertainment
- Non-profits
- Lending firms
- Multi-level marketing firms
- Cooperatives
Before applying, make sure you review SBA’s eligibility and requirements.