SBA Loan Packaging Best Practices: Avoid Common Mistakes

A well-packaged SBA loan moves through the system efficiently. A poorly packaged one gets returned for additional information, delayed in underwriting, or worse, declined for issues that could have been addressed upfront. The difference between the two often comes down to attention to detail and understanding what the SBA requires.

This guide covers the most common packaging mistakes and how to avoid them, helping you submit clean packages that get approved on the first pass.

Eligibility Documentation Mistakes

Eligibility issues are among the most common reasons for loan returns. Verify these items before submission:

Business Size Standards

Every SBA loan must confirm the business meets size standards for its industry. Common errors include:

Using the wrong NAICS code for the business
Failing to include affiliate revenues when calculating size
Not documenting employee count for employee-based standards
Missing size certification forms

For-Profit and Ownership Verification

The SBA requires clear documentation of business structure and ownership:

Organize documents showing entity type and formation
Operating agreements or bylaws showing ownership percentages
Verification that all 20%+ owners are identified
Confirmation the business is for-profit and not primarily engaged in excluded activities

Common Mistake: Failing to identify all beneficial owners. If ownership is held through trusts or other entities, trace through to the ultimate beneficial owners.

Credit Documentation Errors

Personal Financial Statements

SBA Form 413 must be complete and current. Common problems:

Forms older than 90 days at submission
Missing signatures or dates
Assets and liabilities that don't reconcile
Undisclosed debts that appear on credit reports
Missing forms for spouses when required

Tax Return Issues

Tax documentation problems frequently cause delays:

Missing pages or schedules
Unsigned returns (IRS transcripts help verify)
Tax returns that don't match financial statements
Missing extension documentation when applicable
Incomplete business returns for all affiliated entities

                Pro Tip: Always request IRS tax transcripts (4506-C) to verify tax return authenticity. This protects against fraud and satisfies SBA documentation requirements.
            

Use of Proceeds Problems

The use of loan proceeds must be clearly documented and SBA-eligible:

Working Capital

Provide detailed breakdown of how funds will be used
Ensure amounts align with business needs and projections
Document any refinancing components separately

Business Acquisition

Include complete purchase agreement
Provide business valuation supporting the purchase price
Document seller's financial history (typically 3 years)
Address any earnout or seller financing arrangements
Verify the business has been operating for required period

Real Estate

Appraisal meeting SBA requirements (recent, proper scope)
Environmental assessment as required
Documentation of owner-occupancy requirements (51%/60% rule)
Title commitment and survey

Ineligible Uses: Ensure no loan proceeds will be used for floor plan financing, investments in rental real estate, speculative activities, or repayment of delinquent taxes.

Form Completion Errors

SBA forms have specific requirements. Common errors include:

SBA Form 1919 (Borrower Information Form)

All required fields must be completed (no blanks)
Criminal history questions answered completely
Citizenship/immigration status properly documented
Form signed and dated

SBA Form 912 (Statement of Personal History)

Required for all owners of 20%+ and key managers
Must disclose any arrests, not just convictions
Fingerprints may be required depending on responses

Lender Forms

Complete SBA Form 1920 or PLP authorization
Ensure all internal approvals are documented
Verify loan terms match across all documents

Analysis and Underwriting Documentation

Credit Memo Requirements

Your credit analysis should address:

Clear statement of request and recommended terms
Repayment ability analysis with debt service coverage
Collateral analysis and coverage
Management experience and capability assessment
Industry analysis and competitive position
Risk factors and mitigants

Cash Flow Analysis

Use actual historical financials as the foundation
Document adjustments clearly with supporting rationale
Show global cash flow for all principals when required
Demonstrate adequate debt service coverage (typically 1.15x minimum)

Get Better-Packaged Leads

Our pre-qualification process collects initial documentation, reducing your packaging burden.

Learn More

Pre-Submission Checklist

Before submitting any SBA loan, verify:

Eligibility confirmed: Size standards, for-profit status, eligible use of proceeds
All forms complete: Every required field filled, all signatures obtained
Financial documents current: Tax returns within required periods, PFS dated within 90 days
Consistency verified: Numbers match across tax returns, financials, and application
Analysis complete: Credit memo addresses all SBA requirements
Supporting documents organized: Logically arranged and properly labeled
Internal approvals obtained: All required sign-offs documented

Taking time to package loans correctly upfront saves significant time and frustration. Clean packages close faster, maintain borrower confidence, and demonstrate professionalism to the SBA. Build packaging excellence into your process, and you'll see the benefits in faster approvals and happier customers.