Glossary · The loan itself
Eligibility Error
In short
This happens when a borrower or business doesn't meet SBA's specific criteria for a 7(a) loan, often discovered after closing. It can cause the SBA to deny its guaranty.
What it means in a deal
If the SBA finds out after your loan funds that you or the business were ineligible from the start, they can deny the guaranty to the lender. This puts the lender at full risk and can lead to them demanding immediate repayment. A thorough lender's underwriting process aims to prevent this.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Eligibility Error
- How does a lender correct a material error in the E-Tran submission after receiving an authorization?
- What specific fields in SBA Form 1919 are most critical for initial eligibility review, and what common errors lead to delays?
- What is the process for correcting a minor error in the E-Tran system after 7(a) loan authorization?
- How does the SBA typically calculate the amount of guaranty honored if a repair is applied due to lender error?
- How does a lender handle an SBA decision to repair a guaranty due to a minor documentation error during UPP review?
- What are the consequences for a lender if a previously sold guaranteed portion of a loan defaults due to lender error?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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