This actually went into effect and the June 1 update, but it’s not as big of a change as some people make it seem. This is the way it has operated for a lot of years.

In 2023 new rules that came out then allowed for a seller to retain some ownership which allow the buyer to use their license.

The new rules actually still allow a seller to stay on board, they just have to agree to a two year guarantee.

Without that, depending on the state requirements, the buyer can bring a partner on board that has the correct licensing.

From a lenders perspective, they want to know they will get their money back.

A small business is likely to fail within 5 years. If you make it past 1 year, your odds are much greater to make it to 5 years though.

So as a small business owner, you will be asked to cosign on or guarantee any loan to your small business.

And if your personal credit is insufficient for the lenders criteria, then likely any loan will not go thru.

Sorry, that is the way that works.

Sounds like you're in a really strong position — solid financials, strong collateral, and already through most of the process. One missed EIDL payment (especially if it was resolved quickly and there’s no ongoing delinquency) usually isn’t a dealbreaker, especially with a PLP lender. You’ve already done the right thing by addressing it and staying current since.

You're probably closer to the finish line than you think — hang in there!

Totally get where you're coming from — a lot of people are surprised to learn how tough SBA loans can be for first-time founders.

The truth is: SBA loans sound like they’re made for new entrepreneurs, but they really favor buyers with strong personal finances or people acquiring existing, profitable businesses. Starting from scratch? You often need 100K+ in liquidity just to qualify — and that’s before working capital, collateral, or projections.

Buying a business with 10% down can work, but finding one that meets SBA and lender criteria (valuation, cash flow, seller terms, etc.) is a challenge. Most buyers need seller financing, a partner, or outside capital to close the gap.

So who are SBA loans really for? Honestly — second-time business owners, people with savings, or strategic buyers. Not the scrappy founder with a dream and $5K in the bank.

That’s why we built SBAScore.com — to help you figure out your real SBA readiness before wasting time chasing loans you’re not set up to get.

Key points about SBA-guaranteed loans and what happens if you cannot repay:

1. How an SBA loan really works

- The U.S. Small Business Administration (SBA) does not lend money directly to business owners.

- You borrow from a commercial lender (bank, credit union, or non-bank lender).

- To encourage the lender to approve the loan, the SBA promises to reimburse the lender for a portion of any loss—typically 50 %, 75 %, or 80 % of the unpaid balance—if the borrower defaults.

2. What happens if you stop making payments

- Because the note is a regular bank loan, you first default **with the bank**, not the SBA.

- Federal regulations require the lender to try to recover what it can by liquidating any collateral (business assets, personal guarantees, real estate, etc.).

- After liquidation, the lender submits the remaining deficiency to the SBA and receives the guaranteed percentage.

3. How the government collects the deficiency

- Whatever the SBA pays to the lender becomes a debt you now owe **to the U.S. government**.

- The SBA refers this debt to the U.S. Treasury for collection, and the Treasury can use the Internal Revenue Service (IRS) and other federal collection tools.

- One common step is issuance of Form 1099-C (Cancellation of Debt). The canceled amount is reported as ordinary taxable income, which means you may owe income tax on that sum.

- The Treasury Offset Program can intercept future federal tax refunds, Social Security benefits, and other federal payments until the debt (and any associated tax liability) is satisfied.

4. Possibility of negotiating—Offer in Compromise (OIC)

- Before the debt is transferred for collection, you can propose an **Offer in Compromise** to the SBA.

- You submit financial documentation and offer a lump-sum or structured payment that represents the most you can reasonably afford.

- The SBA may accept, counter, or reject the offer. If rejected, the full deficiency proceeds to Treasury/IRS collections.

5. Consequences of default

- Severe, long-lasting damage to personal and business credit.

- Potential loss of pledged collateral and personal assets.

- Ongoing federal collections and tax liabilities until the debt is resolved.

- Legal costs and additional interest or penalties can accumulate.

6. Bottom Line

An SBA guarantee protects the **lender**, not the borrower. To avoid collateral liquidation, tax consequences, and federal collections, stay current on loan payments or contact the lender immediately if trouble arises. Repayment, restructuring, or a successful Offer in Compromise is far less costly than allowing the loan to default.

It appears Bay First conducted an initial, automated review and declined your application solely due to your credit score. Because this was only a lender-level prescreen, the SBA itself never received or evaluated your file. In practical terms, you’re free to approach another SBA lender, and it won’t look as though the SBA has already rejected you.

Building solid business credit is one of the smartest moves you can make for your company’s long-term health. Here’s a no-fluff roadmap:

1. Separate yourself from the business. Form an LLC or corporation so your company’s credit stands apart from your personal score.

2. Grab an EIN. This free IRS ID is your business’s Social Security number—use it for taxes, banking, and credit applications.

3. Open a business checking account. Run every dollar of income and expense through it to create a clean, verifiable paper trail.

4. Add credit lines that report. Start with a business credit card and a few vendor accounts (net-30 terms, office supplies, etc.) that share payment data with Dun & Bradstreet, Experian, or Equifax.

5. Pay early—always on time. On-time or early payments build a strong PAYDEX score and impress future lenders.

6. Watch your reports. Pull your D&B, Experian, and Equifax business files regularly to fix errors before they cost you money.

7. Leverage vendor relationships. Use trade credit with multiple suppliers; every positive transaction strengthens your profile.

8. Check out CDFIs. Community Development Financial Institutions often provide flexible loans and credit-building products for growing businesses.

⚡ Pro tip: Stay on top of cash-flow planning, promote your brand aggressively, and keep tight books. Discipline today equals cheaper capital tomorrow.

Experience isn’t binary—it’s a ladder:

1. Top tier: You’ve already owned or run the exact type of business you’re buying.

2. Strong: You’ve owned/operated something very similar.

3. Solid: You’ve managed a comparable business.

4. Entry-level: You’ve managed teams, finances, or corporate ops, but not in this specific industry.

Show up with zero management or industry background, and every gatekeeper—banks, sellers, brokers, landlords, franchisors—will need serious convincing.

No relevant experience? Team up. Even a partner with just 10 % equity and the right resume can tip the scales in your favor.

The only ways to get a business with real start-up costs going are to fund it yourself, borrow from friends, borrow from family or take a business partner with money.

Quick-hit guide to SBA 7(a) loan qualifications:

- Personal credit: 675+ is the sweet spot. Some lenders drop to ~640 if you can fully secure the loan with collateral.

- Soft pull first: Many lenders start with a soft credit inquiry, so shopping around won’t ding your score.

- Unsecured options: Solid credit can get you up to $500k with no personal assets tied up—just business.

- Scoring systems: Banks lean on the SBA’s E-Tran/SBSS scores. A 170+ usually means faster approvals; 165 is the typical minimum.

- Express programs:

– Up to 33 % of gross revenue (max $150k) or 25 % (max $200k), depending on the bank.

– Need credit 700+ for most, 675+ for a few niche lenders.

– Higher rates: WSJ Prime + 3–6 %.

- Uses: working capital, debt refinancing, big equipment buys. Always comes with a personal guarantee.

- Terms: 10-year amortization, no balloons, no prepayment penalties.

Heads-up on the background check piece of SBA underwriting:

- Expect a deep dive. Old issues usually aren’t deal-breakers, but be ready to explain them.

  – Prior bankruptcies: they can still ask even if it’s 10+ years old. Anything more than 3 years back rarely stops a deal if you have a solid story.

  – Open lawsuits or judgments—personal or business—will get flagged and need clarification.

- UCC filings: lenders pull the full history. If a previous lender never terminated a lien, you’ll have to prove the debt’s paid and get it released.

- Plenty of other quirks can surface, but those are the questions that pop up most often. Have documentation and straight answers ready and you’ll keep the process moving.

Documents that are usually required for an SBA Loan:

- Year to Date P&L & Balance Sheet

- 3 years business & personal tax returns (if business is new & only have 2 years of business taxes, you are ok to proceed, but need at least 2 years of business tax returns

- SBA - Form 413 - Personal Financial Statement

- SBA - Form 1919 - Application

- Debt Schedule

- Equipment/Asset List

- Payoff information on all loans being consolidated

- Multiple Entity Addendum

- 8821 or 4506 - Tax Authorization Form - standard to verify accuracy of tax returns & tax liability exposure

- Some banks require 6 months of bank statements to measure for liquidity

- Articles of Incorporation

- Verification of Liability Insurance, & Workers Comp Insurance (not required in all states)

- Business Personal Property Insurance check - Frequently asked for, but also frequently waived as a request by the lender, but not in all instances.

First off, kudos to you for running a successful salon for three years! As someone with over 10 years of experience in lending, I can tell you that SBA loans are issued through third parties like banks and private lenders, each with their own eligibility criteria to manage risks.

Your situation is not uncommon, and the challenges you're facing could partly stem from how lenders perceive equipment purchases as depreciating assets, which may impact their willingness to approve loans. But don’t worry—there are ways to navigate this. Checkout our SBA Loan Likelihood Score Tool to see your estimated approval odds.

SBA publishes the top SBA lenders by state. Find your state list, and search the top 10. Use a local or local regional bank. They are so much easier to work with usually.

https://careports.sba.gov/views/7a504LenderReport/LenderReport?%3Aembed=yes&%3Atoolbar=no

Yes

SBAScore.com provides you with access to your business’s FICO SBSS score, the very same scoring model that banks and SBA lenders use to prescreen and evaluate SBA loan applications.

Our platform was created to empower business owners by giving them the ability to check their SBSS/ETRAN score instantly, before applying for financing. This is the score that lenders rely on to determine eligibility for SBA loans, and knowing it in advance allows you to strategically choose which banks or lenders to approach, increasing your odds of approval.

You can review this directly on our homepage.

A Note on Score Consistency: While we provide the same SBSS scoring model used by lenders, it’s important to understand that minor differences can occasionally occur. These are typically due to the timing of when the score is pulled or updates in your business or credit data. However, the score you receive from SBAScore.com is designed to be as close as possible to what lenders will see when you apply.

For a deeper dive into the SBSS score and its importance in the SBA loan process, check our blog: Why SBA Loans Matter - And Why Your SBSS Score is the First Step

Yes, your business partner’s credit score can affect your SBSS score, especially if they own 20% or more of the business. The SBSS score is a blended score that evaluates both the business’s financial health and the personal credit of its owners. Any individual who owns 20% or more of the business is typically required to provide a personal guarantee for SBA loans, and their credit profiles are factored into the overall assessment.

At SBAScore.com, we emphasize that the SBSS/ETRAN score is built from a combination of personal credit, business financials, industry data, and public records. As highlighted in our blog:

• “This is a blended score of business and owner personal credit, with underlying historical scoring based on industry loan performance averages.” (Understanding The Top Ways to Get an SBA Loan)
• "Key factors include personal credit, business deposits, profitability, industry code, and public records." (How to Improve ETRAN Score Before You Apply)

If your business has multiple owners, the personal credit of each partner with a significant ownership stake (generally 20% or more) will be reviewed and can impact the SBSS score. If one partner has a weaker credit profile, it may lower the overall score and affect loan eligibility.

In summary:

• The SBSS score incorporates the personal credit of all significant business owners (typically those with 20%+ ownership).
• A business partner’s credit score can positively or negatively influence your SBSS score and, by extension, your SBA loan eligibility.

For more details on how your SBSS score is calculated and how to improve it, visit our resources:

• Understanding The Top Ways to Get an SBA Loan
• How to Improve ETRAN Score Before You Apply

Banks can make different SBA loan decisions even when you have the same SBSS score because each lender has its own unique underwriting criteria and risk tolerance beyond just the score itself. I can confirm that while the SBSS score is a major factor in SBA loan eligibility, it is not the only consideration. Here’s why outcomes can differ:

1. Different Minimum Score Thresholds: Each SBA lender sets its own minimum SBSS score for approval. One bank may require a higher score than another, so you could be declined by one and approved by another with the same score.

2. Additional Underwriting Factors: Lenders also consider other elements, such as:

• Collateral and guarantees
• Cash flow and profitability
• Industry risk (NAICS code)
• Existing banking relationship
• Public records (liens, judgments, bankruptcies)

These factors can weigh differently from one lender to another, impacting the final decision even if your SBSS score is unchanged. For more on what banks look for, see our blog: Understanding The Top Ways to Get an SBA Loan.

3. Lender Preferences and Programs: Some banks specialize in certain industries or business types, and their approval criteria may reflect that focus. Others may have internal policies or portfolio limits that influence their willingness to approve certain loans.

Summary:

• Your SBSS score is crucial, but not the only factor.
• Each lender has its own approval standards and risk appetite.
• Matching with the right lender for your profile is key to getting approved.

The SBSS score updates as your personal and business credit data is reported to the major credit bureaus typically every 30 days or sooner. This means your SBSS score may change monthly, or even more frequently if there are multiple updates to your credit profiles in a short period. The timing depends on when your lenders report new information, such as payment history, balances, or new accounts. In short, your SBSS score is as dynamic as your underlying credit data and can update as often as your credit reports do.

If your SBA loan application was denied due to a low SBSS (SBSS/ETRAN) score, you don’t have to wait a set amount of time before reapplying. However, I strongly recommend that you take strategic steps to improve your score before submitting a new application.

Many business owners are able to boost their SBSS score and secure approval within 30–90 days by focusing on the key factors that influence the score:

• Personal credit (FICO score)
• Business bank deposits and profitability
• Credit utilization
• Industry code (NAICS)
• Public records (liens, judgments, bankruptcies)

Our blog post, Declined for Your SBSS/ETRAN Score?, explains that a low score is usually fixable with targeted changes, and many successful approvals happen within 90 days of making improvements. Another resource, How to Improve ETRAN Score Before You Apply, offers actionable steps to raise your score in as little as 30–90 days.

Recommendations:

• Review your SBSS score and identify areas for improvement.
• Address any weaknesses—such as increasing deposits, reducing credit utilization, or resolving public records.
• Use tools like the SBA Speed Score to estimate your progress before reapplying.

By taking these steps, you can often reapply successfully within 1–3 months, rather than waiting unnecessarily. 

Interest Rates:

• SBA loan interest rates are variable and are typically set at 2.75% to 4.75% above the current Prime Rate.
• As of January 2025, the Prime Rate is 7.5%, so SBA loan rates generally range from 10.25% to 12.25% depending on the lender and program.
• Rates are adjusted monthly based on changes to the Prime Rate.

Fees:

• SBA 7(a) loan guaranty fees returned on March 27, 2025, after a 13-year hiatus.
• For loans up to $150,000, the guaranty fee is 2% of the guaranteed portion.
• For larger loans, the fee increases in tiers, up to a maximum of 3.75%.
• Additional costs may include standard closing costs and possible servicing fees, depending on the lender.

For more details, you can visit the following FastWaySBA articles:

• Interest Rates on SBA Loans
• SBA Loan Guaranty Fees Are Back

1. For-Profit Business: Your business must operate for profit. Non-profit organizations are not eligible.
2. Meet SBA Size Standards: The business must meet the SBA’s size requirements, which vary by industry. Generally, this means being classified as a small business according to SBA definitions.
3. Invested Equity: Owners must have invested their own time or money into the business.
4. Exhausted Other Financing Options: Applicants must demonstrate that they have sought and been unable to obtain funding from other sources before applying for an SBA loan.
5. Business Operations: The business must operate in the United States.
6. Good Credit: A personal credit score of 650+ is often recommended for approval, and the business should be profitable.
7. Approved Uses of Funds: SBA loan funds can be used for land, equipment, inventory, renovations, working capital, and debt refinancing, but not for owner compensation or dividends.
8. Documentation: Applicants should be prepared to provide financial statements, tax returns, business plans, and other supporting documents.

Certain industries and business types may be excluded, such as those engaged in illegal activities or speculative investments.

Check out this article for more details. Understanding the SBA Requirements for Loans.

Yes, you can still qualify for an SBA loan even if you took Merchant Cash Advance (MCA) money last year, but there are important new rules to understand.

As of June 1, 2025, the SBA has updated its Standard Operating Procedures to prohibit SBA lenders from directly refinancing MCA debt. Specifically, the new rule states: “merchant cash advances and factoring agreements are not eligible for refinancing.” This means that if you have outstanding MCA debt, an SBA loan cannot be used to pay off that MCA directly.

However, your business is still eligible to apply for and potentially receive an SBA loan, even if you currently have one or more MCA loans. The key is that only certain SBA lenders are willing to consider applications from businesses with ongoing MCA obligations. These lenders will carefully review your business’s ability to handle both the existing MCA payments and the new SBA loan payments.

Before these new rules, it was common for SBA lenders to pay off MCA debt as part of the loan process, which often improved a business’s cash flow and approval odds. Now, with the direct payoff option removed, it’s even more important to work with the right lender who understands your situation and is open to working with businesses carrying MCA debt.

Every SBA loan application is unique, so if you’re considering applying with current MCA debt, we strongly recommend reaching out to our team at SBAScore.com. We can help you assess your eligibility and connect you with lenders most likely to approve your application under the new guidelines. If an SBA loan isn’t feasible, there may be alternative options such as consolidations, lines of credit, or conventional term loans.

Yes, your business partner’s credit score can affect your SBSS score, especially if they own 20% or more of the business. The SBSS score is a blended score that evaluates both the business’s financial health and the personal credit of its owners. Any individual who owns 20% or more of the business is typically required to provide a personal guarantee for SBA loans, and their credit profiles are factored into the overall assessment.

At SBAScore.com, we emphasize that the SBSS/ETRAN score is built from a combination of personal credit, business financials, industry data, and public records. As highlighted in our blog:

• “This is a blended score of business and owner personal credit, with underlying historical scoring based on industry loan performance averages.” (Understanding The Top Ways to Get an SBA Loan)
• "Key factors include personal credit, business deposits, profitability, industry code, and public records." (How to Improve ETRAN Score Before You Apply)

If your business has multiple owners, the personal credit of each partner with a significant ownership stake (generally 20% or more) will be reviewed and can impact the SBSS score. If one partner has a weaker credit profile, it may lower the overall score and affect loan eligibility.

In summary:

• The SBSS score incorporates the personal credit of all significant business owners (typically those with 20%+ ownership).
• A business partner’s credit score can positively or negatively influence your SBSS score and, by extension, your SBA loan eligibility.

For more details on how your SBSS score is calculated and how to improve it, visit our resources:

• Understanding The Top Ways to Get an SBA Loan
• How to Improve ETRAN Score Before You Apply

Yes, you can see your SBSS score through SBAScore.com without hurting your credit. I can confirm that our platform is specifically designed to provide business owners with instant access to their SBSS/ETRAN score in a way that is completely safe and has no impact on your personal or business credit, we conduct soft credit pulls.This means you can check your eligibility and understand your SBA loan prospects before applying, all without the risk of a hard inquiry or any negative effect on your credit profile.