SBA loan basics
Short answer
For SBA 7(a) loan purposes, anyone who owns 20% or more of the equity in the applicant business is generally considered a 'principal' and is subject to specific requirements.
The SBA defines principals as individuals or entities owning 20% or more of the equity in the applicant business. These principals are typically required to provide a personal guarantee, submit personal financial statements, and undergo character and background checks.
A business has four owners with 25% each. All four would be considered principals by the SBA and would need to personally guarantee the loan and complete all necessary personal disclosures.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SBA Form 1919 - Borrower Information Form
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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