SBA rules · SOP 50 10 8.1

Can I get an SBA loan if I defaulted on a previous SBA or EIDL loan?

An applicant that caused a prior loss to the government on an SBA or EIDL loan is ineligible unless the loss is fully satisfied.

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

In detail

General ineligibility: An applicant is ineligible for a 7(a) or 504 loan if it, or any business owned, operated, or controlled by the applicant or an Associate, previously defaulted on a federal loan resulting in a recognized loss to the federal government.
Covered loans: Federal financing includes any direct or guaranteed business loan made by any federal agency, explicitly including federal disaster loans such as EIDL.
Satisfying the loss: If the prior loss to the government is fully satisfied, the application can proceed, including under delegated authority, provided the lender documents how the loss was satisfied in the file.
Minority investor waiver: Effective 10/01/2026, SBA may grant a case-by-case waiver for an applicant whose owner was a non-controlling minority equity investor (holding less than 20% equity, not a guarantor or co-borrower, and exercising no control) in a business with a prior loss on an SBA 7(a) or 504 loan.
Waiver exclusions: The minority investor waiver is narrow: it does not assist an applicant that itself defaulted, and it expressly does not apply to prior losses involving SBA EIDL, SBA COVID-19 EIDL, PPP loans, or non-SBA federal loans.

The source

What the SOP says

“An Applicant is not eligible for a 7(a) or 504 loan if there is a prior loss to the Federal government.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Prior Loss to the Government 13 CFR § 120.110 (q) (lines 476-480)✓ Verified

“Any loan that is made for business purposes (including Federal disaster loans) by any Federal agency or department either directly or on a guaranteed basis; and

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > NOTE (lines 481-484)✓ Verified

“If a Prior Loss to the Government is fully satisfied, the application can be processed, including under an SBA Lender’s delegated authority. The SBA Lender must document its file as to how the loss has been fully satisfied.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > NOTE (lines 485-490)✓ Verified

“Under SBA’s waiver authority at 13 CFR § 120.110 (q), a waiver may be granted for an Applicant whose owner was a Non-controlling Minority Equity Investor in a business that incurred a prior loss on an SBA 7(a) or 504 loan.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Exceptions to the Prior Loss rule (lines 491-493)✓ Verified

“This waiver applies only to prior losses incurred under SBA Agency loan programs and does not apply to prior losses involving non-SBA Federal loans, other federally assisted financing, PPP loans, SBA EIDL, or SBA COVID-19 EIDL program loans.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Did not have any control over the business with the prior loss (lines 494-495)✓ Verified

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