SBA 7(a) Q&A
Short answer
The coverage amount typically equals the financial loss the business would suffer from the key person's absence, often calculated as a multiple of their salary, their contribution to profits, or the cost to replace them.
Common methods include 5-10 times the key person's salary, 2-3 years of gross profit attributed to them, or specific calculations for lost revenue, recruitment, training, and debt repayment. The goal is to provide sufficient capital to stabilize the business and navigate the transition.
If a key salesperson earns $150,000 annually and directly generates $1,000,000 in annual profit, a business might consider a policy of $1,500,000 (10x salary) or $2,000,000 (2 years profit contribution).
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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