SBA 7(a) Q&A
Short answer
Yes, a significant decline in the target business's financial performance during due diligence can lead to loan denial, as it impacts the ability to repay.
Lenders underwrite loans based on the business's ability to generate sufficient cash flow to cover debt service. If the business experiences a material adverse change (MAC) in its financials during the due diligence period, its projected debt service coverage ratio may fall below acceptable levels, leading to a denial.
If, during your 60-day due diligence period, the target business's monthly revenue drops by 30% and key customers depart, the lender will reassess their financial projections and likely determine the business can no longer support the proposed $800,000 SBA loan.
Lenders continuously monitor the financial health of the target business throughout the due diligence and underwriting process. They look for any material changes that could compromise the business's ability to repay the loan and will require updated financial statements to verify performance.
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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