Glossary · People and paperwork
Key principal
In short
Any individual who owns 20% or more of the business, or holds a position of significant influence or control.
What it means in a deal
This includes owners, officers, directors, or anyone else with substantial management authority. The SBA requires all key principals to provide personal financial information, undergo credit checks, and typically sign a personal guarantee for the loan. Their character and financial health are critical to loan approval.
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 Key principal
- When is a lender *not* required to obtain life insurance on a key principal for a 7(a) loan?
- When is a collateral assignment of life insurance on a key principal mandatory for an SBA 7(a) loan?
- Are there specific requirements for the type of life insurance policy needed for a collateral assignment on a key principal?
- Under what circumstances can a lender waive the life insurance requirement for a 7(a) loan on a key principal?
- How should a lender structure the beneficiary and assignment of life insurance on a key principal for a 7(a) loan?
- Under what specific circumstances can a lender waive the life insurance requirement for a key principal on a 7(a) loan?
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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