It’s well-known that while SBA loans offer low interest rates and long repayment terms, they require a time-consuming and paperwork-heavy application process.
Before you dive into your application, you should familiarize yourself with this list of factors that can automatically disqualify you from an SBA loan.
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
1. Your business is partially owned by a non-U.S. citizen.
Previously, businesses partially owned by non-U.S. citizens were eligible for SBA loans — as long as at least 51% of the business was owned by a U.S. citizen or permanent resident. But, in the first half of 2025, the Trump Administration made a number of changes to SBA loan guidelines, including requiring a business to be 100% owned by U.S. citizens, nationals or lawful permanent residents to qualify.
Additionally, if you’re a U.S. citizen but your business is located in a foreign country, then it doesn’t make sense for you to move forward with an SBA loan application. The SBA requires that your business be within the United States to be eligible for one of its loan programs.
2. You employ too many people or generate too much revenue.
This automatic disqualification is one of the more complex ones to distill. The SBA has strict guidelines for what classifies a business as “small.” But the exact requirements vary by industry and depend on either the total number of employees or the total annual revenue. The SBA gets incredibly granular with industries, assigning a numbered code to each and publishing a chart of small business size standards by industry. Use the chart to determine whether your business is automatically ineligible based on its size.
3. You operate a nonprofit, MLM or other ineligible business.
Nonprofit businesses top the SBA’s list of ineligible business types. The complete list includes more than a dozen different business types that are automatically disqualified from SBA loans. Some are those you might expect: businesses engaging in illegal activities, pyramid schemes, companies operating in the pornography industry. But several more business types that make this list may surprise you. See the dropdown below to determine if your business falls under one of the ineligible categories.
Businesses ineligible for an SBA loan
4. You have too much cash on hand.
The exact language the SBA uses in its list of eligibility requirements is that you must “not be able to obtain the desired credit on reasonable terms from non-federal, non-state and non-local government sources.” That language is a bit vague and confusing, though.
Perhaps a clearer way to think about it is that you shouldn’t be able to reasonably get the credit elsewhere. Your personal liquid assets are one key piece of this requirement. If the lender or the SBA determines from your personal financial statement included in your application that you have the means to self-fund, then you’ll be denied an SBA loan. So, if you have a spare $500,000 hanging out in an account somewhere, and you’re angling for a $100,000 SBA loan, you’re likely to be denied.
5. You haven’t been in business long enough.
Typically, lenders look to three main criteria to determine your “creditworthiness”: time in business, credit score and annual revenue. Because many different lenders — each with their own qualification criteria — issue SBA loans, it’s hard to definitively state the minimum requirements needed to qualify for an SBA loan.
SBA funding advisors at Fundera by NerdWallet, however, have shared the following general qualification minimums:
Personal credit score: 690
Annual revenue: more than $167,000
Time in business: more than two years (need to supply two years of business tax returns)
6. You plan to use the funds to pay off business taxes.
Similar to the list of ineligible business types, the SBA has a clear list of purposes for which you cannot use the loan proceeds. Check the list in the dropdown below to see if your planned use for the loan funds automatically disqualifies you.
Ineligible use of proceeds
7. You’re in the midst of divorce proceedings.
It could seem fairly obvious that you’d be disqualified from a government-backed loan if your business is currently engaged in litigation. What may be less obvious is that even litigation involving personal matters — for example, divorce — can put an SBA loan out of reach for you. So if you’re actively in court pursuing any personal or business matter, it’s best to wait to apply for an SBA loan until the litigation is closed.
8. You’ve previously defaulted on a government-backed loan.
If you’ve ever taken out a government loan in the past and failed to repay it, in part or in full, then you won’t be approved for an SBA loan.
9. You’ve filed for bankruptcy three times.
Requirements around bankruptcies vary by lender — some will consider your application if you’ve filed once, some if you’ve filed up to two times, while others won’t consider a borrower with any bankruptcies in their history. But two bankruptcies is the max; three or more automatically disqualify you from an SBA loan.
What if you’re automatically disqualified from an SBA loan?
If you tick the box on any of these automatic disqualifications, here are some next steps to take to get the funding your small business needs:
If your business type is ineligible for an SBA loan, consider alternative lending, which can open up a long list of nonbank lenders and loan types with less strict requirements.
If you’ve reached the end of this list and none of these automatic disqualifications apply to you and your small business, then forge ahead with confidence in applying for an SBA loan. Use our library of SBA loan resources to get prepared:
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
