For SBA lenders
Short answer
Yes, but only if the default was resolved or the associate can demonstrate extenuating circumstances acceptable to the SBA. The SBA considers past defaults of associates.
The SBA reviews the character of the applicant, including principals and associates. A prior default can disqualify an applicant unless the issue is resolved or acceptable extenuating circumstances are presented. The SBA evaluates whether the associate has paid any prior loss in full or is on a satisfactory repayment plan.
A borrower, ABC Corp., applies for a $500,000 7(a) loan. One 30% owner, Mr. Smith, had a prior SBA loan default five years ago. He can demonstrate the default was due to severe illness and has since repaid the loss in full. The lender would document this for SBA review.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SBA Form 1919 - Borrower Information Form
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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