What does SBA's "credit not available elsewhere" test mean?

What the test is

The credit elsewhere test is the gatekeeper of SBA lending. The section starts from a policy: SBA is a lender of last resort in the sense that it supports credit that the private market will not provide on reasonable terms. The words to read closely are "desired credit," "otherwise available," and "reasonable terms." The test is not whether you could get any loan from anyone, ever. It is whether the specific credit you want could be had on reasonable terms from sources other than federal, state and local government programs.

The section excludes government sources from the comparison. That is why a borrower who could get a state-backed loan is still tested against what private lenders would offer, not against what the state would. The section does not define "reasonable terms," and no dollar thresholds appear in it.

Who has to prove it

The burden falls on the lender, not on you directly. Section 120.101 says 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" without SBA assistance. The last sentence is the practical key: "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." In other words, the act of sending your application to SBA is the lender's certification, and a file that supports it must exist. As the applicant, you can expect to be asked about your financial position and your attempts to borrow elsewhere because the lender needs to document the answer.

The five factors named in the regulation

The text lists considerations "associated with conventional lending practices, including" five items. First, the business industry of the applicant. Second, whether the applicant has been in operation two years or less. Third, the adequacy of collateral available to secure the loan. Fourth, the loan term necessary to reasonably assure repayment of the loan from actual or projected business cash flow. Fifth, "any other factor relating to the particular loan application that cannot be overcome except through obtaining a Federal loan guarantee under prudent lending standards."

The word "including" shows the list is illustrative. The fifth item is the catch-all. The tool above lets you tick which of those five describe your situation. It does not decide anything: the regulation requires a lender's certification supported by its own file, and no checklist on a website can substitute. Use the result as a preparation list for the conversation with a lender about why you are applying for an SBA-guaranteed loan rather than a conventional one.

A worked example

Take a two-year-old catering company that wants $600,000 to buy and equip a commissary kitchen. Its collateral covers a share of the cost, the building is on a 20-year amortization the bank will not offer for a business that young, and the owner has no other pledged assets. A lender could reasonably document that factor two (two years or less) and factor three (collateral) and factor four (term) all apply, and that a 25-year real estate term is not available conventionally. Compare a mature business with ample collateral that wants a short working-capital line. The factors do not point toward needing a federal guarantee, and a lender would struggle to certify. The point is not the dollar amount; it is the lender's ability to show, in the file, why the credit is unavailable on reasonable terms elsewhere.

What happens if the answer is "available elsewhere"

The regulation says SBA provides assistance "only" to applicants who meet the test. If a lender finds the borrower can get the credit on reasonable terms without SBA, the certification cannot honestly be made and the application should not be submitted as an SBA loan. The practical advice for a borrower is to answer the lender's questions about other financing accurately and completely.

What the section does not say

It sets no minimum credit score, no minimum time in business, and no maximum net worth. It does not say that having been turned down by a bank is required, though such a decline can be evidence in a file. It does not list documents the lender must keep, only that substantiation must exist. And it does not describe how SBA reviews the certification after the fact. Other sections of part 120 and SBA's standard operating procedures address those details. Our pages on ineligible businesses and eligible uses cover the other eligibility tests.

Sources

• 13 CFR § 120.101, Credit not available elsewhere. Read November 2, 2026.

Text read: Electronic Code of Federal Regulations, Title 13, Part 120, current through the eCFR issue date of October 29, 2026. Dollar figures and percentages on this page are the ones printed in those sections as of that date; SBA can amend the rule and publishes loan-program procedures (such as SOP 50 10) that add detail this page does not cover. Confirm current terms with an SBA-approved lender or at sba.gov. This page summarizes the regulation and does not replace it.