SBA rules · SOP 50 10 8.1

Can you get an SBA loan after bankruptcy?

Yes, an applicant can obtain an SBA loan after a bankruptcy filing or discharge, provided the bankruptcy did not cause an unsatisfied prior loss to the federal government.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Prior Loss to the government: An applicant is ineligible if the bankruptcy discharged a federal loan or federally assisted financing resulting in a recognized loss to a federal agency. If the prior loss is fully satisfied, or if SBA grants a waiver for an eligible non-controlling minority equity investor, the application may proceed.
Delinquent federal debt: A debt discharged in bankruptcy is not considered in delinquent status, but if a recognized loss was associated with that debt, the applicant remains subject to the Prior Loss rule.
Standard 7(a) and 504 underwriting: A prior personal or business bankruptcy is not an automatic bar to credit, but lenders and CDCs must evaluate repayment ability and include a discussion of any bankruptcy filings in the credit memorandum.
SBA Express and Export Express: For SBA Express and Export Express loans, how much to factor in a past bankruptcy is left entirely to the business judgment of the lender, consistent with its non-SBA commercial loan policies.

How sbaloansHQ handles this

How does sbaloansHQ handle a past bankruptcy?

A past bankruptcy narrows the list of lenders but does not end the search. Send the discharge papers and a short, plain account of what happened, because the lender has to discuss it in its credit memo and a clear explanation helps.

sbaloansHQ is free to borrowers: the lender pays us a referral fee. There is no exclusivity agreement and no upfront deposit. About us

The source

What the SOP says

“For purposes of this paragraph, “loss” means any deficiency on a Federal loan or federally assisted financing that has been incurred and recognized by a Federal agency after it has concluded its write-off and/or close-out procedures for the particular account and includes any amount compromised for less than the full amount, discharged through bankruptcy, and any unreimbursed advance payment under 8(a) or a similar program operated by a Federal agency.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Prior Loss to the Government 13 CFR § 120.110 (q) (lines 476-480)✓ Verified

“If a Prior Loss to the Government is fully satisfied, the application can be processed, including under an SBA Lender’s delegated authority.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > NOTE (lines 485-490)✓ Verified

“The obligor is subject to, or has been discharged from, the debt in a bankruptcy proceeding and, if applicable, the obligor is current on any court authorized repayment plan;

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > A debt is not considered “delinquent” if: (lines 501-505)✓ Verified

“NOTE: If there was a Loss (as defined in Paragraph 15.b. above) associated with any of these debts, the Applicant remains subject to the Prior Loss rule.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > NOTE (lines 506-511)✓ Verified

“Discussion of any liens, judgments, bankruptcy filings or pending litigation including divorce proceedings;

SOP 50 10 8.1, Chapter 1: Standard 7(a) Loans (Loans greater than $350,000) > Insurance Requirements, including: (lines 1665-1681)✓ Verified

“For SBA Express loans, the credit decision, including how much to factor in a past bankruptcy or whether to require an equity injection, is left to the business judgment of the Lender.

SOP 50 10 8.1, Chapter 2: 7(a) Small & SBA Express > Underwriting SBA Express Loans (lines 1811-1821)✓ Verified

“The credit decision on Export Express loans, including how much to factor in a past bankruptcy or whether to require an equity injection, is left to the business judgment of the Lender.

SOP 50 10 8.1, Chapter 5: 7(a) Export Trade Finance > Underwriting (lines 2431-2441)✓ Verified

“The CDC’s credit memorandum must include a discussion on payment delinquencies, judgments, liens, bankruptcy filings, pending litigation, Federal or state tax filings, or other relevant information from the credit reports.

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Payment Delinquencies, Liens and Bankruptcies (lines 3536-3537)✓ Verified

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