For SBA lenders
Short answer
Prudent lending standards require lenders to critically evaluate working capital projections for new acquisitions, ensuring they are realistic, well-supported by historical data or industry benchmarks, and account for post-acquisition operational changes. Projections must demonstrate sufficient liquidity for the business to operate.
For business acquisitions, the SBA expects lenders to apply prudent lending standards when evaluating the borrower's working capital needs and projections. This involves a thorough analysis of historical working capital cycles, anticipated post-acquisition operational expenses, revenue ramp-up, and inventory turnover. Projections should be conservative, justified by market research or industry norms, and demonstrate that the business will maintain adequate liquidity without relying solely on the SBA loan for ongoing operational shortfalls. The lender must identify and mitigate risks associated with unrealistic projections.
A lender reviews a 7(a) loan for a new retail business acquisition. The borrower's working capital projections show revenue doubling in the first year without clear justification. The lender, applying prudent standards, requires revised projections based on historical performance of similar businesses and a detailed breakdown of marketing and operational strategies supporting any projected growth.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
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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