Five Things That Can Delay Your SBA Deal

Five Things That Can Delay Your SBA Deal

By John Thwing, The SBA Guy

We have all heard about the American dream of homeownership, but for folks with entrepreneurial spirit, the dream of business ownership may be even more fundamental. New and experienced business owners often rely on SBA loans to provide the financing they need to get business done. Do you want to buy, expand, or start a business and hope to use an SBA loan for funding? To help your loan get approved and funded, be mindful of some of the issues people can encounter in the SBA loan process.

  1. Personal credit issues – A low credit score or other personal credit issues can be a significant hurdle to getting SBA financing (or financing of any type). Credit score standards vary, but personal credit could be a concern for the lender if your score is under 650 or so.  Even if you have a high credit score, a lender may be concerned about things like late payments, disputed accounts or collection items and may require that these be cleared up or paid-off before closing.
  2. Legal issues – If you have current or prior legal problems, you will want to disclose those in detail early in the process.  The SBA 1919 form asks about legal issues – make sure and complete this form in detail and communicate any current or past issues to your lender. Items to bring up include any criminal charges, lawsuits, judgments, bankruptcies, short sales or current divorce proceedings. These items may be manageable if you are up-front with your lender and give them time to understand the issue.
  3. Lease/Landlord – If you want to buy or start a business and need to operate from the current location or build-out a new one, you will need a new or amended lease. The landlord and their approval process and terms can be the most challenging part of a business purchase or start-up. Make sure and research the landlord’s credit approval process and the lease terms your lender will require to provide the funding. This is an especially important item for many franchise business owners.
  4. Regulatory hurdles – From business licenses to zoning to building permits, many business transactions cannot go forward until one or several governmental hurdles have been cleared. Do you know how and when you will need to interface with the government to get the approvals you need to do business and get funded? Lenders want to know this part is nailed down.
  5. Equity (aka down payment) – Just like with a home mortgage, your SBA lender wants to know and document your equity injection for the business or project. You cannot show up at closing with a briefcase of cash. The SBA lender is required to “source and season” your equity funds, including providing bank statements and showing funds transfers for at least 60 days before closing.

These are some of the more common problems that can cause your SBA loan process to be delayed or even declined. The best thing to do is have a detailed conversation with your lender about any of these issues that might impact your application. The more and sooner you discuss any potential concerns, the less likely these issues will affect the approval and closing of your loan, and the sooner you will be living the American dream of business ownership.


  1. In order to get an SBA loan, be prepared to address key concerns and have detailed and honest conversations with your lender about any issues.
  2. Personal credit or legal issues may come into play when seeking in SBA loan.
  3. Be prepared to show how you will address regulatory, leasing and equity hurdles.