FAQ – SBA Restrictions and Covenants

What ongoing restrictions and loan covenants will the SBA require?

Some typical covenants include the following:

• A change in ownership or control of the business must obtain prior written consent of the SBA.
• Each May and October the business must furnish evidence that real estate taxes have been paid.
• The business must provide evidence of hazard insurance on business property on an annual basis in an amount equal to the SBA loan.
• Corporate tax returns or annual financial statements prepared by an accountant on at least a compilation basis must be provided.
• The business must get SBA consent in writing in order to incur any additional encumbrances on the collateral securing the SBA loan.

It is unusual for the SBA to impose covenants referring to cash flow coverage or
other financial ratios, although, it is acceptable for the bank to do so.