Glossary · People and paperwork
Principals
In short
These are the key individuals who own 20% or more of the business, or those with significant management responsibilities, regardless of ownership percentage. As a buyer, you and any Co-borrower will be considered Principals, and the SBA will scrutinize your character and financial history.
What it means in a deal
For an SBA loan, all Principals must provide Personal financial statement, tax returns, and undergo background checks (including a Felony Conviction check). Understand that your lender and the SBA will evaluate the character and Creditworthiness of every Principal involved in the transaction.
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 Principals
- When is life insurance on key principals a mandatory loan condition?
- When is life insurance required on key principals for an SBA 7(a) loan?
- What are the specific requirements for life insurance collateral assignment when multiple key principals exist?
- How does a lender ensure proper collateral assignment of life insurance on multiple key principals?
- When is life insurance on key principals absolutely required for an SBA 7(a) loan?
- When is life insurance collateral assignment required for key principals in an acquisition, and for whom?
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.
Know what you'll need before you apply
Tell us about the deal and who's buying — we'll flag the guaranty, eligibility, and paperwork issues that slow SBA approval before they cost you time.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.