The Borrower's Glossary
The terms that decide SBA loans, defined plainly, each traced to the rule it comes from and dated to the day it was checked.
Can you apply at all
Will they approve it
- Global cash flow
- Debt service coverage ratio
- Total project cost
- Equity injection
- Adverse change
- The SBSS score, and its sunset
How big, and what counts against it
What you are signing
Where the SBA is pushing capital right now
How to check any of this yourself
Owner-occupied
Sometimes owner-occupancy, or the occupancy requirement.
The share of a building your own business must actually use. SBA real estate lending funds premises you operate from, not property you hold to rent out, and the threshold is different for a building you construct than for one you buy.
If the SBA financing (whether 7(a) or 504) is for the construction of a new building, a Borrower may permanently lease up to 20 percent of the Rentable Property
, provided the borrower occupies at least 60 percent. For an existing building, the Borrower may permanently lease up to 49 percent of the Rentable Property
, provided the borrower occupies at least 51 percent.
Why it decides the loan. This is a threshold question, not a scoring one. Fail it and nothing downstream matters, however strong your coverage is. It also shapes what you can buy: a building where your operation genuinely needs 51 percent of the rentable space is a different search from one where you planned to lease most of it out. Work out your occupancy on rentable square footage before you make an offer, not after.
Start-up
A new business, or one without an operating history.
A business that has not been operating long enough to show a track record. The label is not cosmetic. It changes how much of your own money you have to put in.
The SBA requires a minimum equity injection for all start-up businesses of at least 10% of the total project costs defined as all costs required to become operational.
Why it decides the loan. Ten percent is the floor for a start-up, and it stacks with the property type. A new business buying a purpose-built facility is the most capital-intensive combination in SBA lending. Knowing your number at the outset lets you plan the cash rather than assemble it under pressure. Establish your classification and your injection before you sign anything, including a purchase agreement.
Global cash flow
Also called global debt service coverage, or simply the global number.
The combined ability of a business and its owners' households to service every debt, business and personal, measured together rather than separately.
There is no published SBA ratio called global cash flow. The SBA's own written floor measures the applicant business by itself. Global coverage is credit policy, set by each lender, and it is not published anywhere you can read it.
Verify: the SBA requirement that does exist is quoted under debt service coverage ratio below.Why it decides the loan. A business can carry its own debt comfortably while the people guaranteeing it cannot. A mortgage, two car notes, and tuition appear nowhere on a profit and loss statement, and every one of them sits ahead of the bank in your household's month. Business coverage is almost always the higher number, which is why it is the one borrowers arrive with, and the other one is the one that decides.
Debt service coverage ratio
DSCR. Sometimes debt servicing coverage ratio.
Cash available to pay debt, divided by the debt payments due. A ratio of 1.25 means one dollar and twenty-five cents of cash for every dollar owed that year.
For 7(a) Small Loans, the Applicant's debt service coverage ratio must be equal to or greater than 1.1:1 on a historical and/or projected cash flow basis.
Why it decides the loan. Note the scope. That figure applies to 7(a) Small Loans and it measures the applicant business. It is a floor, not a target, and clearing it is not approval. Most lenders apply a higher bar of their own, commonly 1.20 to 1.25, and apply it to business and household together. Ask yours for their number before you apply, in writing, so you are modelling against the right one.
Total project cost
Every cost required to complete the thing you are borrowing for, not just the price of the asset. Purchase price plus construction, equipment, fees, closing costs, and working capital rolled in.
The SBA defines the base for a start-up as all costs required to become operational
, and for a change of ownership as all costs required to complete the change of ownership, regardless of the source of funds.
Why it decides the loan. This is the denominator for your injection, and getting it wrong is the most common expensive arithmetic error borrowers make. Ten percent of total project cost is a materially larger figure than ten percent of the purchase price. The gap between those two numbers is one of the most common reasons a borrower arrives at closing short on cash, and it is completely avoidable with one calculation.
Equity injection
Your cash in the deal. Sometimes called the down payment, which understates it.
The money you contribute that is not borrowed, expressed as a share of total project cost rather than of the purchase price.
The SBA requires a minimum equity injection for all start-up businesses of at least 10% of the total project costs.
The same 10% minimum applies where loan proceeds fund a complete change of ownership.
Why it decides the loan. Ten percent is the floor, not the answer. A start-up buying a single-purpose building is a different risk from an established company buying a warehouse, and the requirement moves accordingly. Ask which tier applies to you before you model anything, and get the answer in writing. It is a routine question and the answer changes your cash requirement materially.
Affiliation
When the SBA treats two or more businesses as one for the purpose of size and borrowing limits, because of common ownership, common management, or contractual control.
Affiliation is governed by 13 CFR 121.103, which sets out the principles the SBA applies, including control through ownership, management, and identity of interest.
13 CFR 121.103. Read it at ecfr.govWhy it decides the loan. Affiliation is not about what you call your entities. It is about control, and control is assessed on substance. A minority stake with a management role can create affiliation where a larger passive stake does not. Every affiliated entity's existing SBA debt counts against your ceiling, which is why this is the first thing to map on a large deal and the last thing most borrowers think about.
Aggregation and the $10 million limit
How the SBA counts all your borrowing together, across programs and across affiliated businesses, against a single ceiling.
Effective 4 July 2026, the SBA decoupled the two program caps: SBA borrowers may now combine their 7(a) and 504 loans for up to $10 million in SBA-backed financing.
The individual caps are unchanged at $5 million each; what changed is that they no longer count against one another.
Why it decides the loan. The ceiling counts what you already owe, including debt held by entities you may not think of as yours. Work out your remaining headroom before you structure anything, because discovering it late forces a redesign of the whole stack at the worst moment.
Personal guarantee and your house
A promise that makes you personally responsible for the loan, and the separate question of whether the lender also takes a lien against your home.
Where a loan is not fully secured by business assets, lenders are directed to take available equity in personal real estate. The SBA sets a threshold below which it is not required: Properties without significant equity, i.e., less than 25% of its fair market value, are not required to be taken as collateral.
Why it decides the loan. The guarantee and the lien are two different things and they are often discussed as one. You can guarantee a loan without a lien on your home. Whether the lien is required turns on how much equity you hold and whether business assets cover the loan. Establish which applies to you early. It is the term borrowers most often wish they had understood before the closing table rather than at it, and it is entirely knowable in advance.
Adverse change
A deterioration in your finances or operations between approval and funding, which can permit a lender or CDC to decline to close a loan that was already approved.
The certification a CDC signs to induce the SBA to guarantee a debenture requires it to confirm there has been no unremedied substantial adverse change in the financial condition of Borrower or Operating Company
since the date of application.
Why it decides the loan. Approval is not funding, and the weeks between them are worth protecting. Adverse change is assessed at closing, not at approval, and the standard is not defined by a number. Anything that changes your financial picture in that window is worth raising early. Lenders and CDCs would far rather hear it from you in week two than find it in week eight, and early disclosure is one of the clearest signals of a borrower who is ready.
The SBSS score, and its sunset
A credit score the SBA formerly required lenders to pull on smaller 7(a) applications, discontinued as a mandatory screen in 2026.
Effective 1 March 2026, the SBA discontinued required use of the FICO Small Business Scoring Service score for 7(a) Small Loans. In its place lenders must document credit history, debt service coverage of at least 1.1:1, projected earnings, and the two most recent months of commercial bank activity or statements.
SBA Procedural Notices 5000-875701 and 5000-876777, effective 1 March 2026. Read it at sba.govWhy it decides the loan. A score used to be able to carry a marginal file. It no longer can. What replaced it is documentation, which is slower but far more within your control: your bank statements, your coverage, and your credit history now have to tell the story on their own. That is a better system for a prepared borrower and a worse one for an unprepared one.
Manufacturer fee relief
The FY2026 manufacturer fee waiver.
A temporary waiver of SBA guaranty and service fees for small manufacturers, running for the 2026 federal fiscal year.
For 7(a) manufacturing loans of up to $950,000, the upfront fee will be 0%. For all 504 manufacturing loans, the upfront fee and annual service fee will each be 0%.
Applies to small manufacturers in NAICS sectors 31 through 33, for the period October 1, 2025 through September 30, 2026.
Why it decides the loan, and why the date matters more than the number. On a 504 project this is real money removed from the cost of borrowing. It is also dated, and the date is close: the waiver runs out on 30 September 2026. Fee relief attaches to loan approval, not to when you started thinking about it, and SBA approval timelines are measured in weeks. If you are a manufacturer and this applies to you, the calendar is now part of your structuring decision. Confirm with your lender in writing whether your specific loan qualifies and what approval date is required.
The Made in America Loan Guarantee
The enhanced International Trade Loan guarantee for manufacturers.
A higher federal guarantee on loans to domestic manufacturers, delivered through the SBA's International Trade Loan program rather than through a new program.
The International Trade Loan program was enhanced to provide a 90 percent federal guarantee for small manufacturers, against the standard 75 percent under 7(a). Eligibility opened to manufacturers in NAICS sectors 31 through 33 from 1 May 2026, and was extended to small businesses across the food supply chain. Stated uses include equipment upgrades, facility modernisation, supply chain diversification, inventory, and acquisitions that expand operations.
SBA announcement, 31 March 2026, effective 1 May 2026. Administrator Loeffler:This Administration is transforming America into a nation of builders once again.Loan limits and terms were not stated in the announcement, so confirm both with your lender.
Why it decides the loan. The guarantee percentage is not your interest rate and it is not your approval odds, but it changes the lender's exposure on your file, and lender exposure is what makes a marginal deal fundable. If you manufacture, ask whether your project can be structured through this program rather than standard 7(a). It is a recent change and worth raising yourself, since a borrower who knows the programs is easier to structure a deal around.
SOP
Standard Operating Procedure. The current lending one is SOP 50 10 8.
The SBA's own operating manual for its lending programs. It is what your lender is actually following, it is public, and you can read the same copy they do.
SOP 50 10 governs the 7(a) and CDC/504 loan programs. The current edition, SOP 50 10 8, was issued in 2025 and announced by SBA Information Notice 5000-868665. Editions are numbered in sequence, so 50 10 8 replaced 50 10 7.
Every SOP states its own effective date on its cover page. Check the cover rather than trusting a summary, including this one. Editions overlap in practice and a file in progress may be worked under the prior version. Find it at sba.govWhy it decides the loan. When a lender tells you the SBA requires something, that requirement lives in a numbered section of a document you are allowed to read. Asking which section is a normal question. It also helps you tell an SBA requirement apart from a lender's own credit policy. Both are legitimate and both are common, but only one of them is negotiable, and knowing which is which makes you easier to work with.
CFR
Code of Federal Regulations. Cited like 13 CFR 120.131.
The regulations themselves, which sit above the SOP. Where an SOP is the SBA's internal procedure, the CFR is binding law, and it changes far more slowly.
Title 13 is Business Credit and Assistance
. Chapter I is the Small Business Administration. Within it, Part 120 is Business Loans
and Part 121 is Small Business Size Regulations
. A citation reads title, then part, then section: 13 CFR 120.131 is Title 13, Part 120, Section 131.
Why it decides the loan. Two parts cover most of what will be argued about on your file. Part 120 holds occupancy, use of proceeds, and program mechanics. Part 121 holds size and affiliation. If a term on this page carries a CFR citation, that is the ceiling: no lender policy, CDC practice, or SOP paragraph overrides it, and you can read it in about four minutes.
Procedural and Information Notices
Cited like SBA Procedural Notice 5000-875701.
How the SBA changes the rules between editions of the SOP. A Notice can add a requirement, remove one, or set a number, and it takes effect on its own date without waiting for the SOP to be reissued.
The debt service coverage floor that governs 7(a) Small Loans today does not appear in the SOP. It arrived in Procedural Notice 5000-875701, effective 1 March 2026, and was supplemented by a second Notice. A borrower who read only the SOP would not know the rule they are being underwritten against.
Notices are published at sba.gov and carry a number, an issue date, an effective date, and often an expiration date. Check the expiration: fee relief and temporary programs live in Notices and they end.Why it decides the loan. This is the most common reason a borrower and a lender are working from different numbers, and it is why guidance written even a few months ago can be out of date. The SOP is the manual, the CFR is the law, and the Notices are the amendments that neither document reflects yet. When a rule comes up, a useful question is which of the three it comes from and what date it carries. It is the quickest way to get everyone on the same page.
Certification
The signed statements on SBA forms, such as SBA Form 2101.
A written statement of fact, signed by a named person, that the SBA relies on when it guarantees a loan. Certifications are made by lenders and CDCs as well as by borrowers.
SBA Form 2101, the CDC Certification, is signed to induce the U.S. Small Business Administration (SBA) to guarantee payment of a debenture
and covers, among other things, that project costs are accurately reflected and that the CDC has disclosed all material information known to it.
Why it decides the loan. These are the documents that record your project's numbers for the federal file, and most borrowers never think to ask for a copy. Ask anyway, keep them with your closing documents, and check that the figures line up. It takes an afternoon and it means you understand your own file as well as anyone working on it.
Sourcing. Every definition names where it comes from. Where the SBA has published a number, the number is quoted and linked. Where there is no published number and the practice is set by lenders instead, that is said outright rather than dressed up as a rule. The difference between those two things is where most borrowers get caught.
What is not here yet. Post-close liquidity, eligible use of proceeds, size standards, the 504 debenture and its pricing, interim financing and the CDC buyout, franchise eligibility, and change of ownership. Each is drafted and stays unpublished until it can be quoted from its source.
One entry held back. A definition of how a CDC handles surplus after a liquidation is written and not published. The regulation usually cited for it, 13 CFR 120.847, is titled Requirements for the Loan Loss Reserve Fund and does not say what it is commonly summarised as saying. Rather than publish a characterisation that does not survive reading the section, it waits until it can be stated exactly. If a definition here is ever wrong, it should be wrong by omission.
Corrections. If something here is out of date or wrong, write to me and I will fix it and change the date at the top of the entry.
The rest of the file
These terms are not separate topics. They are one process, and they are worked through in order here.
- What is global cash flow — the wider number your lender runs, and what the SBA actually publishes
- What to do before you apply — the four stages, with the injection worked through
- The application checklist — printable, 2026 edition
- The Loan-Ready Kit — the whole file: affiliation mapping, capital stack, both Borrower's Files, and a database of 2,865 lenders and CDCs
- SBA loans, start to finish — the whole route in one page