Who Can Apply for an SBA Loan ?

Before getting qualified for a Small Business Administration loan, 1st you must have been became down as an conventional loan. Almost little businesses that fill these requirement is eligible as Small Business Administration loans, though a few cases by businesses is ineligible. Eligibility in general depends upon 4 elements: 1) the type of business, 2) the size of the business, 3) the use of loan funds, and 4) special circumstances.

Size of Business
The Small Business Act defines an eligible small business as one that is independently owned and operated — and not dominant in its industry. The Act also states that the definition of small business varies from one industry to another. However, most businesses qualify as "small" under the SBA size guidelines.

Type of Business
The requirements in this category are quite broad. The business must be a for-profit enterprise. It must engage in or must propose to do business in the United States or its possessions. The business owner or loan applicant must have a reasonable financial investment in the business. And the owner must invest other financial resources, including personal assets, before applying for an SBA loan. 

Use of Loan Funds
Business owners may use SBA loans for a number of business activities, including purchase of real estate; construction, renovation, or leasehold improvements; acquisition of furniture, fixtures, machinery, and equipment; purchase of inventory; and working capital.

A business owner cannot use an SBA loan:

• To purchase real estate where the participant has issued a forward commitment to the developer or where the real estate will be held primarily for investment purposes.
• To finance floor plan needs.
• To make payments to owners or to pay delinquent withholding taxes.
• To pay existing debt, unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of poor management.

Special Circumstances
Certain other requirements and restrictions apply to businesses and applicants in the following categories:

• Franchises
• Recreational facilities and clubs
• Farms and agriculture
• Fishing vessels
• Medical facilities
• Alter egos
• Change of ownership
• Aliens
• Probation or parole
• Academic schools

For more information on these "special circumstances" rules, consult the SBA special circumstances guidelines.

Ineligible Businesses
Certain types of businesses are explicitly ineligible for SBA loans. Ineligible businesses are those characterized by any of the following:

• Lending activities 
• Real estate investment and other speculative activities 
• Pyramid sales plans 
• Gambling activities 
• Illegal activities 
• Businesses with an owner who is on parole 
• Charitable, religious, or certain other nonprofit institutions