this page is run by pearl financing. not a direct lender. not a commitment to lend. business financing only; terms and approval vary.
What is SBA’s “credit elsewhere” test?
It’s the rule in 13 CFR 120.101, “Credit not available elsewhere.” The regulation says, “SBA provides business loan assistance only to applicants for whom the desired credit is not otherwise available on reasonable terms from non-Federal, non-State, and non-local government sources.” The Lender or CDC has to certify or otherwise show it, taking into account factors the regulation names.
General education, not financial advice.
The rule
13 CFR 120.101: “SBA provides business loan assistance only to applicants for whom the desired credit is not otherwise available on reasonable terms from non-Federal, non-State, and non-local government sources.”
Note the exact wording: “not otherwise available on reasonable terms.” That’s the regulation’s standard, and it’s worth reading as written.
Who has to show it
The regulation puts this on the Lender or CDC:
13 CFR 120.101: “SBA requires the Lender or CDC to certify or otherwise show that the desired credit is unavailable to the applicant on reasonable terms and conditions from non-Federal, non-State, and non-local government sources without SBA assistance”
The factors the regulation names
The rule says this is done taking into consideration factors “associated with conventional lending practices, including:”
- “The business industry of the loan applicant”
- “whether the loan applicant has been in operation two years or less”
- “the adequacy of collateral available to secure the loan”
- “the loan term necessary to reasonably assure repayment of the loan from actual or projected business cash flow”
- “any other factor relating to the particular loan application that cannot be overcome except through obtaining a Federal loan guarantee under prudent lending standards”
These are the regulation’s words, listed as factors.
It goes on file
13 CFR 120.101: “Submission of an application to SBA by a Lender or CDC constitutes certification by the Lender or CDC that it has examined the availability of credit to the applicant, has based its certification upon that examination, and has substantiation in its file to support the certification.”
So the certification is tied to the application itself, and the regulation expects support for it in the Lender’s or CDC’s file.
Scope
SBA program rule for SBA lenders and CDCs; other loans follow their own policies. This is the regulation’s text, not a statement about any applicant’s chances, and not a statement that any lender the linked offer works with is an SBA lender.
FAQ
What does “credit not available elsewhere” mean for SBA loans?
13 CFR 120.101: “SBA provides business loan assistance only to applicants for whom the desired credit is not otherwise available on reasonable terms from non-Federal, non-State, and non-local government sources.”
Who has to show that credit isn’t available elsewhere?
13 CFR 120.101: “SBA requires the Lender or CDC to certify or otherwise show that the desired credit is unavailable to the applicant on reasonable terms and conditions from non-Federal, non-State, and non-local government sources without SBA assistance”
What factors does the regulation name?
Factors “associated with conventional lending practices, including”: “The business industry of the loan applicant”; “whether the loan applicant has been in operation two years or less”; “the adequacy of collateral available to secure the loan”; “the loan term necessary to reasonably assure repayment of the loan from actual or projected business cash flow”; and “any other factor relating to the particular loan application that cannot be overcome except through obtaining a Federal loan guarantee under prudent lending standards.”
What does submitting an SBA application certify?
13 CFR 120.101: “Submission of an application to SBA by a Lender or CDC constitutes certification by the Lender or CDC that it has examined the availability of credit to the applicant, has based its certification upon that examination, and has substantiation in its file to support the certification.”
general education, not financial advice. this post is general education. it does not mean any specific loan type is available through pearl.
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Source: 13 CFR 120.101, Credit not available elsewhere (current eCFR). All quotes above are from this section.
Pearl Financing connects businesses seeking funding with lending partners. We are not a direct lender. Loan terms, rates, and approval are subject to credit review and vary by applicant. Not all applicants will qualify. Business-purpose financing only. This is not a commitment to lend.
