How SBA will use your personal financial status
July 21, 2020 | Last Updated on: July 22, 2022

July 21, 2020 | Last Updated on: July 22, 2022
The U.S. Small Business Administration offers a variety of small business loans aimed to help business owners get the funds they need to successfully launch and grow their businesses. And for many small businesses, these loans can be extremely helpful. Not only do SBA loans typically offer low interest rates, but they also have longer repayment terms than many other small business loans, making them an attractive way for small businesses to get access to the capital they need.
But the area where many small business owners have questions (and, for some, concerns) is the difference between business finances and personal finances—and, more specifically, how their personal financial status will impact their ability to secure an SBA loan for their business.
Let’s take a look at how the SBA leverages personal financial information to determine business loan eligibility, including the types of loans where personal finances may come into play:
There are four different types of loans offered by the Small Business Administration:
Clearly, the SBA has a variety of loans for a variety of purposes. But the question is, does the SBA use business owners’ personal financial information to determine eligibility—and, ultimately, to decide whether to approve the business’ SBA loan?
Even though business finances and personal finances are two separate things, the Small Business Administration does weigh personal financial status to determine eligibility for many of their loans.
Most SBA loans require applicants to fill out SBA Form 413—also known as a personal financial statement. A personal financial statement is required to apply for both 7(a) and 504 loans—and a modified personal financial statement (SBA Form 413D) is required for disaster loans.
If your business is applying for an SBA loan that requires a personal financial statement, there may be multiple people that need to complete SBA Form 413 (or, in the case of a disaster loan, SBA Form 413D). This includes:
If any of the abovementioned loan applicants are married and file a joint tax return with their spouse, their married partner—and any relevant financial information—will also need to be included on the personal financial statement.
In order to successfully complete your personal financial statement and submit an SBA loan application, you’ll need to include both basic personal information (including name, address, social security number, and business name) and relevant financial documentation—in regard to both your assets and your debt.
Required asset information for SBA Form 413 includes:
Required liability information for SBA Form 413 includes:
The SBA uses your personal financial statement as a way to evaluate your creditworthiness, your debt, and your ability to pay back a loan. By including relevant debt information (like credit card balances) and relevant asset information (like your bank account balances and market value quotations for your real estate investments) with your application, the SBA is able to get a clear picture of your current financial situation and compare your net worth to your total liabilities—which can help them determine whether you’re an attractive candidate for a loan.
What you can do to improve your personal financial status before applying for
If you’re concerned about how your personal financial status may impact your ability to secure a small business loan, there are steps you can take before applying:
If you have less-than-perfect credit and are worried how that may impact your ability to secure a small business loan, remember: even though the SBA uses your personal financial statement as a way to evaluate your eligibility for a loan, it’s not the only factor they weigh. Ultimately, SBA loans are business loans—so while your personal creditworthiness (and the creditworthiness of your partners) is important, ultimately, your business’ financial health and ability to pay back the loan is what’s most important.