SBA 7(a) Q&A
Short answer
Lenders conduct extensive due diligence on financial statements, including analysis of trends, cash flow, debt service coverage, tax returns, and verification of assets and liabilities.
To ensure the acquired business is financially sound and can repay the loan, lenders scrutinize several years of financial statements and tax returns. They look for consistency, profitability, and sufficient cash flow.
For a $1,000,000 acquisition, the lender will review 3 years of P&Ls and balance sheets, reconcile them with tax returns, analyze working capital cycles, and project future cash flows to ensure a debt service coverage ratio (DSCR) of at least 1.15x.
Insider move
Lenders worry about inconsistencies between internal financials and tax returns, aggressive accounting practices, undisclosed liabilities, and unrealistic projections. They often require third-party verification of key financial data.
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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