SBA Form 1920: Lender’s Application for All 7(a) Loan Programs

Whether you need funding to start or grow a business or see your company through difficult times, a loan from the Small Business Administration (SBA) may be the answer. Prior to Aug. 1, 2023, your application for the SBA’s popular 7(a) loan would have included SBA Form 1920.

Also known as the Lender’s Application for Loan Guaranty, this was the paperwork the SBA used to determine whether it would guarantee your loan. This guarantee reduces the risk for lenders, allowing them to offer relatively high approval rates and reasonable fees and terms.

The SBA retired Form 1920 in August 2023.

What was SBA Form 1920?

SBA Form 1920 was a part of the borrower’s loan package, but lenders needed to complete it — not the borrower. Borrowers have their own form, SBA Form 1919. Lenders and the SBA use these forms and other supporting documentation to evaluate your business’s eligibility for the SBA 7(a) loan program.

SBA Form 1919 is still in use, but now the SBA has lenders input information that used to go on Form 1920 into the Capital Access Financial System (CAFS), the web-based system the SBA uses for loan origination and servicing for the SBA’s loan program.

Much of the same information that went into Form 1920 is still collected and used by lenders with the new system, so understanding the information collected is useful when applying for an SBA loan.

Here’s an overview of each section of SBA Form 1920.

Part A: Processing method

The first section of Part A of SBA Form 1920 asked the lender whether processing the application would be delegated or non-delegated.

• Non-delegated processing. For non-delegated processing, the SBA makes the loan approval decision, including evaluating the borrower’s credit.
• Delegated processing. For delegated processing, the SBA-approved lender has the authorization to make credit decisions and approve applications without prior review by the SBA. However, its decisions must comply with SBA requirements.

The majority of loans guaranteed by the SBA are done under delegated processing. The SBA grants delegated authority to certain lenders that it deems able to develop and analyze complete loan packages and that have a good track record with the SBA.

Processing options

The lender next indicated which type of 7(a) loan the borrower is seeking, if different from the standard 7(a) loan. The SBA 7(a) actually consists of several different loans, including:

• Standard 7(a). Maximum loan amount of $5 million.
• 7(a) Small Loan. Maximum loan amount of $500,000.
• CAPLines. Maximum loan amount of $5 million. This program includes four different SBA lines of credit.
• SBA Express. Maximum loan amount of $500,000 with an accelerated turnaround time for SBA review. The SBA Express can be revolving (like a line of credit) or a term loan.
• Export Express. Maximum loan amount of $500,000. Designed to help small businesses develop or expand their export markets. The loan can be revolving (like a line of credit) or a term loan.
• International Trade. Maximum loan amount of $5 million. Designed to provide long-term financing to businesses that are expanding because of growing export sales.
• Export Working Capital. Maximum loan amount of $5 million. Designed for businesses that can generate export sales and need additional working capital to support these sales.
• Community Advantage. Maximum loan amount of $350,000. This initially started as a pilot program designed to help businesses in underserved areas. It was due to expire on Sept. 30, 2024, but the Biden-Harris Administration made it permanent by creating Community Advantage Small Business Lending Company (CA-SBLC) licenses for lenders that specialize in serving underinvested small businesses.

If you were applying for a Community Advantage loan or 7(a) Small Loan, you would have needed to answer questions in Section U. If you were applying for a CAPLine loan, you’d have needed to complete Section S. Applicants for Export and International Trade Loans would also have needed to complete Section T. These sections provided program-specific requirements and limitations for different types of loans.

Part B: Lender information

Section B of SBA Form 1920 was for the lender to provide their own information. You didn’t need to provide any information for this section. It was just the lender’s name, address, identification number and contact information.

Part C: Applicant business information

In Section C, your lender provided some basic information about your business. This included whether your business is a startup (not yet open), a new business (open two years or less), an existing business (open more than two years) or a business undergoing a change of ownership. Businesses planning to use 7(a) proceeds to fund or refinance a change in ownership would have needed to fill out sections O and P.

Other information you may have needed to provide to your lender to complete this section included:

• Business’s legal name and DBA, if applicable
• When the business was first established and the date when the current ownership was established, if different
• Address, phone number and point of contact
• Tax identification number as well as NAICS Code
• The legal structure of the company, such as sole proprietor, partnership, LLC or corporation. ESOPs — Employee Stock Ownership Plans — needed to fill out Section F
• Number of people employed by the business and number of jobs created or retained because of the loan
• Whether the business was in an urban or rural area

Eligible Passive Company

This section also included a box to check if your business is an Eligible Passive Company (EPC). Typically, the SBA does not loan money to passive companies, such as real estate holding companies. However, it makes an exception for EPCs if the business uses the loan to acquire, improve or renovate property it leases to an operating company.

Co-applicant business information

If you had a co-applicant, your lender needed to provide information about the co-applicant. This included their name, address, tax identification number, the date the business was established and legal structure.

Part D: Loan structure information

Section D of the SBA 1920 form was for the lender to provide details on the structure and amount of your loan. This included:

• Requested loan amount
• Amount to be guaranteed by the SBA
• Loan term (in months)
• Payment amount
• Whether the interest rate was fixed or variable, how often the rate would adjust and when the first adjustment would occur
• Whether the rate was based on Prime, the SBA Peg rate or another underlying index

Part E: Complete project information

Section E of SBA 1920 provided information to the SBA on how you intended to use the loan proceeds. Options included:

• Purchasing land
• Constructing, expanding, or renovating property
• Improving property leased to others
• Purchasing machinery, furniture and fixtures or inventory
• Supplying working capital for the business
• Acquiring another business
• Paying off an existing SBA loan or other payables — such businesses would have needed to fill out Section Q and included a business debt schedule

This section also included a column for “applicant equity injection,” which was essentially a down payment required in certain circumstances, including startup businesses and changes in ownership.

How to fill out SBA Form 601

If $10,000 or more of your loan proceeds will be used for construction or renovation, you must also complete SBA Form 601. By signing this form, both the borrower and contractor agree they will not discriminate against anyone based on race, color, religion, sex or national origin in their hiring and employment decisions.

Sections G-R: Eligibility requirements

The remaining sections of SBA Form 1920 required the lender to answer questions that helped determine eligibility for an SBA loan. Here’s an overview of those general eligibility requirements:

• Be a for-profit business. SBA loans are typically not available to non-profit organizations. Eligible applicants are for-profit businesses that are officially registered and operating legally.
• Do business in the U.S. Only companies physically located and operating in the U.S. or its territories are eligible for SBA loans.
• Have invested equity. The SBA generally requires a business owner to invest their time and money into the business.
• Exhaust financing options. The SBA typically only makes loans to companies that cannot get funds from another lender.
• Meet SBA size standards. The SBA does not have a one-size-fits-all definition of what constitutes a “small” business. Its definition of small varies by industry. You can determine whether your business qualifies as a small business by using the SBA’s Size Standards Tool.
• Be an “operating company.” As we mentioned earlier, the SBA generally doesn’t make loans to passive companies, such as developers or landlords that make money by collecting rents or earning money from investments. However, the SBA makes an exception for Eligible Passive Companies that lease property to one or more operating companies.

Personal guarantee

The SBA also requires lenders to get a personal guarantee from at least one owner of the business receiving the loan. All owners with an interest of 20% or more in the business must personally guarantee the loan. This means if the company is unable to pay back the loan, the guarantor is personally liable to pay back the outstanding debt.

Criminal charges

Section J of SBA Form 1920 required the lender to get information about the borrower’s criminal record. If you answered “Yes” to the question indicating you were currently under indictment, you would not be eligible for an SBA loan.

Ineligible businesses

Section G of SBA Form 1920 lists general eligibility requirements for an SBA 7(a) loan. These ineligible businesses include:

1. Non-profit businesses
2. Businesses whose primary function is lending money (i.e., banks, life insurance companies, finance companies, factoring companies, etc.)
3. Passive businesses (discussed above)
4. Life insurance companies
5. Businesses located in a foreign country or owned by an undocumented immigrant
6. Multi-level marketing businesses where the participant’s primary incentive is based on recruiting new distributors rather than selling products
7. Businesses that get more than one-third of their revenues from legal gambling
8. Companies involved in any illegal activity
9. Private clubs or businesses that limit the number of memberships for reasons other than capacity
10. Government-owned entities, except for businesses owned or controlled by a Native American tribe
11. Businesses that earn one-third or more of their revenue from packaging SBA loans
12. Businesses with an associate who is currently incarcerated, serving a prison sentence, or under indictment for a felony or any crime involving or relating to financial misconduct or a false statement
13. Businesses in which the lender or any of its associates owns an equity interest
14. Companies that earn more than a de minimis amount of gross revenue from sales of products, services, depictions or displays that are “of a prurient sexual nature”
15. Businesses primarily engaged in political or lobbying activities
16. Speculative businesses, such as mining or research and development

If you previously defaulted on a federally insured loan, such as a home loan backed by the FHA, USDA or VA, or a federal student loan, you may not be eligible for an SBA loan. However, if your default was due to circumstances beyond your control, your lender may be able to request a waiver.

Citizenship requirements

The small business applying for the loan must be at least 51% owned and controlled or managed by a U.S. citizen or lawful permanent resident of the U.S.

Franchisees

Some franchise businesses are eligible for SBA loans, and you would have needed to complete Section R on Form 1920. The SBA maintains a franchise directory to help lenders evaluate which franchises are eligible for its 7(a) loan program. . The lender needs a copy of your franchise agreement and SBA Form 2462 or Form 2463.

Section V: Fees paid to others

Section V asked one question: Whether the applicant paid a fee to the lender or another third party to assist with preparing the loan application or other materials.

If the answer is yes, the lender and applicant must complete SBA Form 159. This form identifies any paid help you received during the loan application process to ensure lenders and other third parties don’t take advantage of borrowers by charging exorbitant fees.

How lenders submitted Form 1920

Once your lender gathered SBA forms 1919 and 1920 and other required forms and documents from you, the lender signed the lender certification section of your application. Then, it submitted your loan package to the SBA electronically.

The lender can submit your SBA loan application using one of two systems: SBA One or e-Tran. These are systems that only SBA-approved lenders can access — borrowers cannot submit their loan applications or supporting documents on their own.