SBA Borrower Equity Requirements
Understand the Borrower equity requirements of popular SBA loan programs.
Do you need money for your small business, but haven’t been able to get the funds you need from conventional sources because you’re short on equity or collateral? An SBA 7(a) loan may be the answer to getting the cash injection you need to start or expand your business. Note, however, that SBA lenders still test you for creditworthiness -- which includes SBA borrower equity requirements. But with a little preparation, you’ll be one step closer to signing a loan agreement under this government-sponsored program.
Lenders may be in the business of lending money, but they want to manage the amount of risk they take on in the process. Before you can get approved for an SBA 7(a) loan, you’ll need to meet the borrower equity requirements by showing the lender that you have invested a certain percentage of your own money in your venture.
SBA Loan Requirements for New and Existing Businesses
The expectations about how much you would need to put into your business vary, depending on whether you are looking to borrow funds for a startup or an established company.
If you are starting a new business or buying an existing one, a good rule of thumb to remember is that the lender wants to see an investment of $1 (cash or business assets) for each $3 borrowed.
For an existing business, the lender wants to see a maximum of $4 of debt to $1 of net worth.