SBA 7(a) Q&A
Short answer
Coverage amounts are typically calculated based on the financial impact of the insured's death, considering factors like lost profits, replacement costs, outstanding debt, and the duration of the impact.
Methods include the 'Human Life Value' approach (estimating lost future earnings), the 'Needs Analysis' approach (covering specific financial obligations like debt, operating expenses, and recruitment), or a multiple of the key person's salary or profit contribution. The goal is to quantify the financial void their absence would create.
A business calculates that if its CEO dies, it would lose $500,000 in annual profits for two years, cost $100,000 to recruit a replacement, and has $1,000,000 in outstanding loans. They would aim for at least $2,100,000 in coverage.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of business life-insurance and SBA collateral-insurance practice (SOP 50 10 8). Not insurance, legal, or tax advice. 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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