# What makes a business eligible for an SBA 7(a) or 504 loan?

**Short answer:** The business must be operating, for-profit, U.S.-based, small under SBA size standards and able to show need for the credit (13 CFR § 120.100). It also cannot be on the ineligible list in 13 CFR § 120.110.

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Last checked: 2026-11-08

A business qualifies when it meets every core test in 13 CFR § 120.100 and is not on the ineligible list in § 120.110. Those tests are carried into SOP 50 10 8.1, effective October 1, 2026. Under Sec. A, Ch. 1, the applicant must meet them at application and through closing and disbursement.

## The core tests

- It is an operating business. The one exception is an Eligible Passive Company (§ 120.100(a)).
- It is organized for profit (§ 120.100(b)).
- It is located in the United States, its territories or possessions (§ 120.100(c)).
- It is small under SBA size standards, counting affiliates (§ 120.100(d)).
- It can show a need for the credit (§ 120.100(e)). SBA applies this through the credit elsewhere test in § 120.101.

## Tests beyond that list

Since March 1, 2026, every direct and indirect owner must be a U.S. citizen or U.S. national. Each must have a principal residence in the United States, its territories or possessions (SBA Policy Notice 5000-876441). 13 CFR § 120.150 also requires that the applicant be creditworthy and that the loan reasonably assure repayment.

SBA sets these rules and your lender applies them. Credit standards beyond the rules vary by lender.

## Sources

- [13 CFR § 120.100](https://www.ecfr.gov/current/title-13/section-120.100)
- [13 CFR § 120.110](https://www.ecfr.gov/current/title-13/section-120.110)
- [SOP 50 10 8.1, Sec. A, Ch. 1 (p. 13)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SBA Policy Notice 5000-876441 (effective March 1, 2026)](https://legacy.sba.gov/document/policy-notice-5000-876441-update-sop-50-10-8-citizenship-residency-requirements-recission-procedural-notice-5000-872050)
- [13 CFR § 120.150](https://www.ecfr.gov/current/title-13/section-120.150)
- [sba.gov/loans/7a-loans (read November 8, 2026)](https://www.sba.gov/loans/7a-loans/)
- [SBA Information Notice 5000-882227, p. 1 (Sept. 25, 2026)](https://legacy.sba.gov/document/information-notice-5000-882227-issuance-technical-updates-sop-50-10-81)