Can you get an SBA loan after defaulting on a federal loan?
Short answer
Not while a loss to the government stands. The bar reaches the applicant and businesses tied to it or an Associate. Full satisfaction of the loss or an SBA waiver can clear it. Source: 13 CFR § 120.110(q); SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.
Not unless the loss is repaid or SBA waives the rule. 13 CFR § 120.110(q) and SOP 50 10 8.1, Sec. A, Ch. 1, Para. E bar applicants with a Prior Loss to the government.
What counts as a Prior Loss
A Prior Loss exists when either of these defaulted on a federal loan or federally assisted financing and the government took a loss:
- The applicant.
- Another business owned, operated or controlled by the applicant or an Associate. That includes one that guaranteed a defaulted loan.
A loss includes a deficiency recognized after the agency finishes write-off or close-out. It also includes an amount compromised for less than full and an amount discharged in bankruptcy. Federal disaster loans count.
What does not count
Unpaid taxes are not a loss under this rule. Neither is a loss the FDIC takes when it sells a loan at a discount. Loans held by Fannie Mae or Freddie Mac, and federal loans to individuals such as student loans, are outside it.
How lenders find out
All lenders must check CAIVRS, the Credit Alert Verification Reporting System, and keep proof in the file.
How to clear it
If the Prior Loss is fully satisfied, the application can proceed, including under delegated authority. The lender must document how it was satisfied.
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
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