What a Lender's Credit Memo Includes, and the Documents Lenders Ask For
The credit memo is the lender's written analysis of your loan request. For a 7(a) Small loan of $350,000 or less, SBA Procedural Notice 5000-876777 (effective March 1, 2026) says the memo must state why credit is not available elsewhere and cover eleven items, from your credit history to your collateral. The papers behind it vary by loan size and lender, and SBA's text gives no single document list, so ask for yours in writing.
What the credit memo is, and what it is not
The lender writes the credit memo, and you supply the facts and papers it draws on. The memo is not your business plan. SBA's plan guide says lenders and investors commonly request the detailed plan, so expect to send yours with the papers below.
The notice sets what the memo must cover. Since March 1, 2026, SBA no longer uses the SBSS score (its small-business credit score) as a screen for 7(a) Small loans. The 2026 changes are on the SBA page, along with your plan's section checklist and the lender's checks beyond your plan.
The memo, section by section
Rows 1 to 11 follow the notice's list. Row 12 pairs the notice's process with lender practice, and row 13 is lender practice only. (practice) means lender practice, not an SBA rule. Text without that mark comes from the notice. Ask your lender means the notice does not say.
| Memo item | What the analyst checks | Documents that feed it (who provides; timing) |
|---|---|---|
| 1. Summary and loan request | The operating business, its ownership and the loan request | Your plan's summary and ownership list (you) (practice) |
| 2. Why credit is not available elsewhere | The memo must state why credit is not available elsewhere | Decline letters from other lenders, if you have them (practice) |
| 3. Credit history of the applicant, its Associates and guarantors | Credit history of the applicant, its Associates (as 13 CFR 120.10 defines them) and its guarantors. Owners of 20% or more generally must guarantee the loan | Personal and business credit reports, which the lender pulls (practice). SBA Form 413, personal financial statement, used "to assess repayment ability and creditworthiness." Who signs it: ask your lender |
| 4a. Repayment ability: the ratio | A debt service coverage ratio of at least 1.10:1 for 7(a) Small loans, on a historical or projected basis. Operating cash flow comes from the year-end statement or the projections. Debt service is the principal and interest due on all business debt, including the new loan (our reading of the notice). The notice lets the lender make its own additions to and subtractions from operating cash flow, so ask which adjustments it will make. Formula: DSCR calculator | One of the three routes in row 4b |
| 4b. Repayment ability: the statements | Which of three routes supplies the cash flow figure | The last year-end statement (tax return, internal statement or accountant-prepared); or that statement plus an interim statement; or 12-month projections with assumptions. Timing: the year-end statement is dated and received within 120 days of year end; the interim statement is dated within 120 days of submission to SBA; projections must reach 1.10:1 within one year of funding |
| 4c. Repayment ability: bank activity | The two most recent months on the primary operating account, unless the applicant is not operating and has no commercial debts | Statements from your bank (practice) |
| 5. Collateral and estimated value | "A description of any proposed collateral and estimated value." The lender may also test coverage by the collateral (practice) | Collateral list (you). SBA "may require" a professional appraisal, a survey or a feasibility study (an appraiser, where one is required) |
| 6. Working capital | Over $50,000, with 50% or more of the proceeds for working capital. The lender must explain why that level is "necessary and appropriate" | Use-of-funds breakdown (you) (practice). The lender writes the explanation |
| 7. Seller financing and standby terms | "The terms of any seller financing and standby agreements." A standby creditor's agreement (SBA Form 155) ranks the creditor's lien behind the lender's, and the creditor cannot act without the lender's consent | The seller note, and a Form 155 where a standby creditor is involved. Who signs Form 155: ask your lender |
| 8. Liens, judgments and litigation | "Discussion of any liens, judgments, or pending litigation, including divorce proceedings." | Your disclosure, in the form the lender asks for (you). Lien and judgment searches (practice) |
| 9. Franchise review, if the business is a franchise | Franchise review. The notice names the item and gives no detail, so ask your lender what its review covers | The franchise agreement, if the lender asks for it (ask your lender). The SBA Franchise Directory lists brands "eligible for SBA financial assistance" |
| 10. Refinanced debt | "Any debt refinancing, including justification and original purpose." | Old loan papers and payoff letters (you) (practice) |
| 11. Affiliates | The effect that affiliates have on the applicant's repayment ability | A list of affiliated businesses and their debts (you) (practice) |
| 12. Risk view and rating | The lender's own process, which must be "appropriate, prudent, and generally accepted industry credit analysis processes" for credit history and repayment ability. The rating and the main risks are practice | The lender writes this part |
| 13. Conditions before funding, and covenants | The missing items from rows 2 to 11 as conditions, and a yearly coverage test at 1.10:1 as an example covenant (practice) | The lender sets them, and you meet them. Each lender sets its own covenants (practice) |
The documents, by loan program
SBA's 7(a) page says the contents of a loan application "vary depending on the size of the loan and the lender's processing method." The table shows what SBA's text says for a 7(a) Small loan, which is $350,000 or less.
| Document (memo item) | 7(a) Small, $350,000 or less | Who completes or signs; timing |
|---|---|---|
| Year-end statement: tax return, internal statement or accountant-prepared (item 4b, route 1 of 3) | Yes. Dated and received within 120 days of year end | You, or your accountant |
| Interim statement (item 4b, route 2 of 3) | Yes, with the year-end statement. Dated within 120 days of submission to SBA | You, or your accountant |
| 12-month projections with assumptions (item 4b, route 3 of 3) | Yes. Required for a complete change of ownership. Must reach 1.10:1 within one year of funding | You |
| Two most recent months of bank statements, primary operating account (item 4c) | Required, unless the applicant is "not currently in operation and has no commercial debts or obligations" | Your bank (practice) |
| SBA Form 413, personal financial statement (item 3) | Used "to assess repayment ability and creditworthiness" for 7(a) loans, among other programs | Ask your lender which owners sign it |
| SBA Form 1919, Borrower Information Form (item 1) | "[T]o be completed by the small business applying for a 7(a) loan" | You complete it and submit it to your lender |
| Collateral list with estimated value (item 5) | Yes | You |
| Appraisal, survey or feasibility study (item 5) | SBA "may require" them | A professional appraiser, where required. Ask your lender who does a survey or feasibility study |
| Working-capital explanation (item 6) | Only over $50,000, with 50% or more of the proceeds | You give the use of funds (practice). The lender writes the explanation |
| Seller-financing and standby terms; SBA Form 155 (item 7) | Terms required. Form 155 ranks the standby creditor's lien behind the lender's | The seller and any standby creditor. Ask your lender who signs Form 155 |
| Lien, judgment and litigation disclosure (item 8) | Discussion required, including divorce proceedings | You (practice) |
| Franchise documents (item 9) | Franchise review. The SBA Franchise Directory lists eligible brands | You (practice). Ask your lender which franchise documents it needs |
| Refinancing justification and original purpose (item 10) | Discussion required | You (practice) |
| Guarantee by each owner of at least 20% (item 3) | Holders of at least 20% "generally must guarantee the loan" | Each owner of at least 20% |
| Business plan | "Lenders and investors commonly request this plan." | You |
| Resumes and CVs | Plan-page advice from SBA, not a lender rule: "Consider including resumes and CVs of key members of your team." | You |
For a Standard 7(a) loan, over $350,000, ask your lender for its list. The notice is titled for 7(a) Small loans, and the SBA text we read does not extend its three routes or its memo list to larger loans.
SBA's text has no document list for microloans or 504 loans. For a microloan, ask the microloan intermediary for its list (SBA's microloan page). For a 504 loan, ask your Certified Development Company (CDC) and your private lender, because SBA says 504 loans are available only through CDCs.
Worked example: a credit memo for Harbor Street Print Shop
Harbor Street Print Shop is a fictional business. Its loan and cash-flow figures are the same as the worked example on the SBA page. Inputs marked invented are made up for this example. The 11.0% rate is assumed, not a quote.
| Memo item | Harbor Street input | Result |
|---|---|---|
| 1. Request | $150,000 term loan over 10 years (120 monthly payments) at 11.0% fixed | Under $350,000, so the 1.10:1 test applies |
| 6. Working capital | $120,000 for a wide-format press and $30,000 of working capital (invented split) | Working capital is $30,000, under $50,000, and 20% of proceeds, under 50%. The rule needs both tests, so the explanation does not apply |
| 4a. Repayment ability | Operating cash flow (OCF) $42,000 from the last year-end statement, before lender adjustments (invented). Other business debt $9,600 a year (invented) | Monthly payment $2,066.25, or $24,795.00 a year. Debt service is $24,795.00 plus $9,600.00 of other debt, or $34,395.00. Ratio 1.22, which passes. Headroom above the 1.10:1 minimum is $4,165.50, or 9.9% of OCF |
| 4a. Stress case | OCF falls 15% to $35,700 (the 15% is invented) | Ratio 1.04, which fails. The notice routes a loan that misses the ratio to Standard 7(a) or SBA Express procedures |
| 4a. Loan size the cash flow supports | At OCF of $42,000, and at the stressed $35,700, with the same 11.0% rate, 120-month term and $9,600 of other debt | About $172,900, and about $138,200, rounded down to the nearest $100. These are the largest loans that reach 1.10:1 on these inputs, not a recommendation |
| 5. Collateral | The press (invented) | Estimated value not in this example. SBA "may require" an appraisal |
| 3. Owners and guarantors | One owner holds 100% (invented) | The owner generally must guarantee the loan. The owner's credit history is not in this example |
| 4c. Bank statements | Two most recent months, primary operating account | Not in this example |
| 8. Liens and litigation | None disclosed (invented) | The memo still discusses them |
| 12. Risk view (practice) | Three risks, all invented: a sales drop, reliance on one press, and dependence on one owner | The stress case fails at a 15% drop. Headroom is 9.9%, so a 9.9% fall in operating cash flow reaches the 1.10:1 line, and headroom is itself a risk. The example's mitigant (practice): the owner's guarantee |
| 13. Conditions (practice) | The missing items above | Before funding, the missing items. Example covenant: a yearly coverage test at 1.10:1. Each lender sets its own |
The steps are on the SBA page. You can run your own figures in the DSCR calculator.
Questions to ask your lender
Take these to the first call, or send them in writing.
- Which repayment route will you use for my loan: the last year-end statement, that statement plus an interim statement, or 12-month projections?
- Will my year-end statement need to be dated and received within 120 days of year end, and my interim statement dated within 120 days of submission to SBA?
- What minimum coverage ratio will you apply to my loan, and is it above 1.10:1?
- Which cash flow adjustments will you make, and which owners hold at least 20% and must guarantee the loan?
- Which owners must sign Form 413?
- Will you need an appraisal, a survey or a feasibility study for the collateral?
- Is my working capital more than $50,000 and at least half of the loan proceeds? If so, what will you write in the memo to justify it?
- Will my seller note need a standby agreement on Form 155, and who signs it?
- Which liens, judgments or pending lawsuits, including any divorce proceedings, do I need to disclose, and in what form?
What the generator drafts, and what it does not
The 15minuteplan.ai generator drafts a business plan. We checked its sample plans in our code on 2026-10-12. They have income statements for the first year and for years 1 to 5. They have no balance sheet, no cash-flow statement and no debt-service heading. A search of our product code on 2026-10-16 found no credit-memo output, so the credit memo comes from your lender. If your lender asks for a balance sheet or cash-flow statement, your accountant or bookkeeping software can supply one. The SBA page's table lists what the generator drafts and what you add.
FAQ
Does SBA decide my loan?
Your lender decides whether to lend and writes the credit memo. After your lender submits the loan guaranty request online, SBA makes the final eligibility determination.
What if my coverage is under 1.10:1?
The notice says the loan "must be processed following the procedures for either Standard 7(a) or SBA Express Loans." The quoted sentence does not say the loan is refused. Ask your lender which procedure applies and what it changes for you. Check your own ratio in the DSCR calculator.
Which SOP version applies to my loan?
SOP 50 10 is SBA's standard operating procedure for its lending programs. Version 8.1 applies to applications issued an SBA loan number on or after 2026-10-01. Lenders keep using version 8.0 for 7(a) and 504 applications submitted through 2026-09-30. We did not read the body of version 8.1, so ask your lender which version applies to your loan number.
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The 15minuteplan.ai generator drafts the narrative sections of a business plan from the numbers you enter.
Start a plan on 15minuteplan.aiSources and date checked
Read on 2026-10-12:
- SBA Procedural Notice 5000-876777, "Sunset of SBSS Score for 7(a) Small Loans - Supplemental Guidance," effective 2026-03-01, read in a copy hosted by NAGGL.
- SBA pages: 7(a) loans, microloans, 504 loans, and the 7(a) lender terms, conditions and eligibility page (dated 2025-11-18).
- SBA, Plan your business: write your business plan (published 2025-12-18).
- SBA forms: Form 1919, Form 413 and Form 155.
- SBA Information Notice 5000-880695, Issuance of SOP 50 10 8.1 (published 2026-08-14).
- 13 CFR 120.10 and 120.160, in the eCFR text of part 120.
How we made this. We quote only text we copied from these sources. On 2026-10-16 we rechecked our arithmetic and our product code. A loan officer has not reviewed this page. It is general information, not advice on your loan.