The start-up conditions it checks
SBA treats a business as a start-up for the equity rule if it has been in operation, generating revenue from its intended operations, for one year or less. A 7(a) loan to a start-up requires an equity injection of at least 10 percent of the total project costs, which are all the costs to become operational whatever the source of funds. Cash that is not borrowed counts, and so does debt on full standby for the term of the 7(a) loan.
For start-ups and other loans based on projections, the lender's projections must reach a debt service coverage of at least 1.15 within two years of funding. The calculator tests the projected yearly cash flow you enter against that figure and against the yearly payments on the new loan and on your existing debt.
Worked example: $100,000 project
A new business with a $100,000 project cost puts in $15,000 of its own cash, so it needs an $85,000 loan. That is 15% equity against the 10% minimum, a $10,000 requirement. At 10.5% over 10 years the payment is $1,146.95 a month, or $13,763.37 a year, and a projected cash flow of $40,000 gives coverage of 2.91 against the 1.15 needed. The business meets all four conditions checked, and its cash flow would support a loan of up to $214,810.89 over the same term.
When a condition is not met
With only $5,000 of equity on the same project, the equity is 5% and the business is $5,000 short of the 10% requirement. With $15,000 of projected cash flow and $4,000 of yearly payments on existing debt, the coverage falls to 0.84 and the cash flow supports only $55,850.83. A business that has operated for more than a year is not a start-up under SBA's rule, so this equity condition no longer applies and the lender sets the equity it wants.
7(a) or a Microloan
A 7(a) loan can be up to $5,000,000 over up to 10 years for these purposes. An SBA Microloan is smaller: up to $50,000, repaid over up to seven years, made through an intermediary that sets the rate, generally 8% to 13%, and the terms. The calculator shows whether the loan you need fits the Microloan limits. A $36,000 loan over five years at 11% fits, with a payment of $782.73 a month.
It cannot show whether a lender will approve the loan. SBA-approved lenders make every credit decision and set the terms, and the calculator does not assess credit, collateral or experience.
For an established business, use the US business loan eligibility calculator.
Use the right country page
This page stays in US dollars and uses the SBA 7(a) rules. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the startup business loan eligibility calculator, which checks the UK Start Up Loans scheme in pounds. The inputs reset and amounts are not converted.
Inputs for the US startup business loan eligibility calculator
Months the business has been operating
Months generating revenue from its intended operations. One year or less counts as a start-up.
Total project cost and your equity injection
The total cost to become operational, and the cash or standby debt you put in. The loan is the difference.
Interest rate and term
The nominal yearly rate you expect and the years you would repay over.
Projected yearly cash flow
Your projection of profit available to pay debt in the second year, before the new loan's payments.
Yearly payments on existing debt
What you already pay each year on loans, including debt the business will carry.
CALCULATOR QUESTIONS
US startup business loan eligibility calculator questions
What counts as a start-up for an SBA 7(a) loan?
A business that has been in operation, generating revenue from its intended operations, for one year or less.
How much equity does a start-up need?
At least 10 percent of the total project costs. Cash that is not borrowed counts, and so does debt on full standby for the term of the loan.
What debt service coverage do start-up projections need?
The projections must reach a debt service coverage of at least 1.15 within two years of funding.
What are the SBA Microloan limits?
Up to $50,000, repaid over up to seven years, made through an SBA intermediary that sets the rate, generally 8% to 13%.
Does this calculator check my credit?
No. An SBA-approved lender makes every credit decision and sets the terms. A pass here is not an approval.
What happens when I change country?
The United Kingdom option opens the separate startup business loan eligibility calculator, in pounds, which checks the Start Up Loans scheme. Your inputs are reset rather than converted.