SBA 7(a) Q&A
Short answer
Acquiring a business highly dependent on government contracts can complicate SBA 7(a) approval, as these contracts can be unpredictable, subject to political changes, and have unique payment cycles.
Lenders view heavy reliance on government contracts as a risk due to factors like funding uncertainties, complex procurement processes, and potential for contract termination. The business must demonstrate a stable financial history and a diversified revenue strategy or a strong track record of securing such contracts.
If a target business for a $1.5 million acquisition generates 70% of its revenue from a single federal contract, the lender will require extensive due diligence on the contract's terms, renewal history, and the buyer's ability to maintain or diversify this revenue.
Insider move
Lenders scrutinize government contracts for stability, profitability, and duration. They assess the buyer's experience in navigating government procurement and look for clear strategies to mitigate the concentration risk, such as pursuing commercial clients.
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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