SBA rules · SOP 50 10 8.1

What does credit not available elsewhere mean for an SBA loan?

Credit not available elsewhere means the applicant cannot obtain some or all of the requested loan funds on reasonable terms from non-government sources, including the lender or third-party lender, without SBA assistance.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Core test: If the applicant's cash flow, collateral, and third-party guaranties meet conventional underwriting standards of the lender or third-party lender, the project is ineligible for an SBA loan.
Owner and business liquidity: The lender must determine that funds cannot be obtained from the liquidity of the applicant itself or owners of 20% or more of applicant equity, including their spouses and minor children, with allowances for medical, educational, retirement, and near-term business needs.
Demonstrating credit weakness: The credit memorandum must substantiate why the applicant does not meet conventional credit policy with supporting documentation, such as requiring a longer maturity, exceeding policy loan limits, inadequate collateral, or being a startup or restricted industry.
Impermissible bases: The lender cannot cite an applicant's conventional credit score as the sole basis, cannot rely solely on secondary market liquidity or legal lending limits, and cannot consider CRA ratings or collateral lien improvement in any manner.

The source

What the SOP says

“The SBA Lender must certify and indicate that the Applicant does not have the ability to obtain some or all of the requested loan funds on reasonable terms from non-Federal, non-State, or non-local government sources, including from the SBA Lender or Third Party Lender, without SBA assistance. If the Applicant’s cash flow and collateral, including the adequacy of any third party guaranty, would cause the Applicant’s loan to meet conventional credit standards of the SBA Lender or Third Party Lender, the Project is not eligible for an SBA Loan.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Credit Not Available Elsewhere (lines 618-620)✓ Verified

“The liquidity of owners of 20% or more of the equity of the Applicant, their spouses and minor children, and the Applicant itself (except that SBA permits owners to have reasonable funds set aside for possible future medical expenses, educational expenses (including for the children of the business owner) and retirement needs; and for the Applicant, SBA permits the Applicant to have reasonable funds for capital expenses for the next 24 months and for working capital); or

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > The SBA Lender must include in its credit memorandum: (lines 621-631)✓ Verified

“The SBA Lender may not cite the Applicant’s inability to meet the SBA Lender’s or Third Party Lender’s conventional credit score policy as the sole reason that credit is not available elsewhere.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > The SBA Lender must include in its credit memorandum: (lines 621-631)✓ Verified

“The SBA Lender may not rely in any manner on the following factors to demonstrate that the Applicant does not have credit available elsewhere:

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > The SBA Lender must include in its credit memorandum: (lines 632-637)✓ Verified

“In addition to summarizing the operating business, ownership, and loan request, the Lender’s credit memorandum must state why credit is not available elsewhere, and include the following:

SOP 50 10 8.1, Chapter 2: 7(a) Small & SBA Express > Underwriting 7(a) Small Loans (lines 1764-1776)✓ Verified

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