SBA Answers Questions
April 6, 2026
Bob Coleman
Founder & Publisher
Main Street Monday: SBA Answers Questions
1. Question – Can an Ineligible Person be a Supplemental or Limited Guarantor?
Answer – Yes. SBA does not restrict a Lender’s ability to obtain additional supplemental guarantees so long as the non-owner individual is not an undocumented alien who is in the United States illegally.
2. Question – What is the process to enter an individual in E-Tran as a Supplemental or Limited Guarantor who is also a Lawful Permanent Resident?
Answer – When entering the correct guarantee (either Supplemental/Limited Unsecured Guarantee or Supplemental/Limited Secured Guarantee), select “Lawful Permanent Resident Alien” under both Citizenship and Country of Citizenship.
3. Question – Can an Ineligible Person divest their ownership for a transaction to move forward?
Answer – Yes. A transaction may proceed if the Ineligible Person completely divests their direct and indirect ownership interest prior to issuance of the SBA loan number. The six-month lookback rules continue to apply to all other situations not involving an Ineligible Person.
4. Question – Are Naturalized Citizens who hold dual citizenship eligible?
Answer – Yes. Naturalized U.S. Citizens are eligible. If an Applicant owner holds dual citizenship with a country that would otherwise make the transaction ineligible under SBA policy, the Lender should confirm that the country of origin no longer regards the individual as a citizen and document this in the loan file.
5. Question – What impact do the new Citizenship and Residency requirements have on loans that were approved prior to March 1, 2026, and have an Ineligible Person in ownership?
Answer – Lenders may continue to perform servicing actions in accordance with SOP 50 57 and the Lender Matrix.
6. Question – Can we modify the ownership on loans that were approved prior to March 1, 2026, that have an Ineligible Person in ownership?
Answer – Yes. The Lender may modify ownership on existing loans in accordance with SOP 50 57, so long as any new owners being added are not Ineligible Persons under SBA policy.
7. Question – When underwriting a transaction of $350,000 or less, must I use the 7(a) Small underwriting standard?
Answer – No. Lenders may choose to process a loan of $350,000 or less under Standard 7(a) guidelines instead of using the 7(a) Small underwriting standard. When doing so, all Standard 7(a) requirements apply, including the full credit analysis, loan requirements (i.e., collateral, guaranties, etc.), and documentation required by SOP 50 10 8.
8. Question – What is the role of the commercial bank activity or statements in the new 7(a) Small underwriting standards?
Answer – Under the revised 7(a) Small underwriting requirements, the Applicant’s two most recent months of commercial bank activity or statements must be obtained and used to validate the debts and obligations included in the Debt Service Coverage Ratio calculation. This includes confirming any sales-based repayment obligations, such as Merchant Cash Advances or similar arrangements.
9. Question – Prior to the change, a passing SBSS score satisfied the requirement to determine the repayment ability of the Applicant. Is there a similar assurance now that SBSS has been sunset?
Answer – Yes. For 7(a) Small loans, when the Lender calculates an acceptable Debt Service Coverage Ratio (at least 1.10:1 on a historical or projected basis, as specified in the Notice) and uses two months of bank activity to confirm the debts and obligations included in that calculation, the requirement to determine repayment ability is satisfied. The credit memo must still address the loan request, Applicant’s operations, management, and other key factors in line with SOP 50 10 8.
10. Question – What are our options if the Applicant cannot meet the required Debt Service Coverage ratio?
Answer – If the Applicant does not meet the required Debt Service Coverage Ratio under the 7(a) Small standard, the Lender may consider processing the request as a Standard 7(a) loan or, if the Lender has the applicable authority, as an SBA Express loan.
11. Question – How should we evaluate the interim period of seasonal businesses if that period is also their “off-season”?
Answer – To verify that a seasonal business is in a similar financial state during the interim period, the Lender should obtain the corresponding interim financial statement for the prior year.