For SBA lenders
Short answer
Lenders should document a comprehensive analysis of the borrower's personal tax returns (3 years), personal financial statement, and global cash flow, demonstrating sufficient capacity to support personal debt and business debt if needed.
Prudent lending standards require an assessment of the borrower's overall financial condition, not just their FICO score. This includes evaluating personal liquidity, debt-to-income ratio, contingent liabilities, and historical financial performance to determine their capacity to support the business and withstand financial stress.
For a $700,000 7(a) loan, a lender obtains the borrower's personal tax returns for the last three years, a current personal financial statement, and statements for all personal debt. The lender's credit memo details the borrower's net worth, analyzes their global cash flow to service personal obligations, and assesses their capacity to inject additional capital if required by the business.
Insider move
Lenders must demonstrate a thorough understanding of the borrower's entire financial picture. Failure to document a comprehensive personal financial analysis can lead to a finding of imprudent lending if the loan defaults, resulting in a guaranty repair.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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