What is Principal?

Principal refers to the owner or owners of the Applicant Entity who hold a controlling financial interest in the business. According to the Small Business Administration (SBA), controlling interest is defined as ownership of 20% or more of the Applicant Entity, or being a General Partner or Managing Member, irrespective of the ownership percentage.

Think of Principals as the key decision-makers and stakeholders who have a significant influence on the direction and operations of the business. They are the individuals with the authority to make important financial and operational decisions.

At its core, identifying Principals helps clarify the ownership structure and leadership of the business. It ensures transparency and accountability by pinpointing the individuals responsible for the business's success and financial well-being.

For the SBA and other stakeholders, understanding the Principals is crucial for assessing the credibility and reliability of the business. It helps evaluate the qualifications and integrity of the individuals involved in the management and ownership of the Applicant Entity.

By defining the Principals, businesses can establish clear lines of responsibility and accountability, fostering trust and confidence among lenders, investors, and other stakeholders. It's like shining a spotlight on the key figures driving the business forward and ensuring its long-term success and sustainability.