SBA loan basics
Short answer
It is possible, but challenging. Lenders will focus intensely on the business's cash flow projections and the buyer's plan to return the business to profitability and positive net worth.
While a strong balance sheet is preferred, the SBA primarily emphasizes the ability to repay the loan from cash flow. If a business has a negative net worth but compelling projections and a viable turnaround strategy, a lender might consider it, especially if there's sufficient collateral.
A manufacturing business has outdated equipment leading to losses and negative net worth, but a buyer with a strong operational plan and new capital infusion project significant profitability. An SBA loan might be possible if the cash flow projections are highly credible.
Insider move
Lenders are highly risk-averse to negative net worth. They will require exceptionally strong, well-supported cash flow projections, a detailed business plan outlining corrective actions, and potentially higher equity injection from the buyer.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. 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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