SBA Loans: What They Are and How to Get One

SBA loans remain a popular choice for small businesses as they offer some of the most competitive terms and rates on the market. Most business owners are likely familiar with 7(a) business loans and CDC/504 real estate loans, but the SBA offers a wide variety of loan products for different uses and different types of businesses.

Types of SBA Loans

The Small Business Administration offers several types of loan and lines of credit for small businesses in the United States. Most loans from the SBA are not made directly by the SBA, but are made through an intermediary lender, such as a bank or credit union, with a portion of the loan amount guaranteed by the SBA (typically up to 75% or 85% of the loan amount).

The 7(a) General Small Business Loan is one of the SBA’s flagship programs and an affordable and popular option for businesses to get financing. Businesses can apply for up to $5 million in funding and can use these funds for a variety of purposes, including real estate, working capital and business expansion.

Interest rates on 7(a) loans are pegged to a Prime Rate (either the Wall Street Journal or or the London Interbank One Month Prime Rate) plus an additional markup percentage determined by the SBA, which is based on the loan amount and repayment terms. Current interest rates max out between 6% and 8%.

Because the SBA guarantees a portion of each loan, there is a guarantee fee for each 7(a) loan. The guarantee fee is based on the loan’s maturity date and the amount guaranteed, not the total loan amount. Current guarantee fees range from 0% to 3.75% of the guaranteed portion of the loan. The SBA will guarantee up to 85% of loans of $150,000 or less, and 75% of loans of more than $150,000.

As part of the 7(a) loan program, the SBA also offers expedited reviews through the SBA Express program and loans to underserved businesses through the Community Advantage Loan program. Both of these loan programs offer only a fraction of the funds that the standard 7(a) loan does and have higher maximum interest rates. However, if you need funds more quickly or are in an underserved market, they are still great options for funding. In the table below, we detail some of the other SBA loan and line of credit programs.

Loan ProgramMax. AmountMax. Interest RatesPurpose/Use
7(a) Loan

(Learn More)

$5 million6.75% - 9.25%
  • Working capital
  • Inventory/receivables
  • Equipment or supplies
  • Real estate
  • Construction or remodel
  • Business acquisition
  • Business expansion
  • Refinancing debt
SBA Express 7(a) Loan

(Learn More)

$350,0009.00% - 11.00%
  • Same as standard 7(a) loan
  • Loan decision in 36 hours
Community Advantage Loan$250,00010.50%
  • Same as standard 7(a) loan
  • For startup and underserved businesses (in low-income communities, veteran-owned, etc.)
CAPLines (line of credit) (Learn More)$5 million6.75% - 9.25%
  • Contracting
  • Seasonal inventory
  • Construction
  • Working capital

(Learn More)

$50,000~8.00% - 13.00%
  • Working capital
  • Inventory or supplies
  • Furniture or fixtures
  • Machinery or equipment
CDC/504 Loan

(Learn More)

$5 - $5.5 million~4.00% - 5.00%
  • Land/building purchase
  • Land/lot improvements
  • Construction or remodel
  • Long-term equipment
Disaster Loan

(Learn More)

$2 million4.00% or 8.00%
  • Business physical disaster
  • Economic injury
  • Military reservists economic injury

To get the most updated interest rates for 7(a) and 504 loans, see our resource on current SBA loan rates.

SBA Loan Requirements

Because most SBA loans are made through participating lenders, requirements will vary by lender. The SBA only outlines a set of minimum requirements that businesses must meet for 7(a) loans (many of these requirements also apply to other types of SBA loans):

  • For-profit company located in the U.S.
  • Meet small business size requirements and be an eligible type of business
  • Plans to use funds for approved purposes
  • Not have funds available from other sources, including personal sources
  • Ability to repay loan on-time with good projected cash flow
  • Not be delinquent on any debt to the U.S. government
  • Good personal character
  • Management expertise and commitment
  • Feasible business plan

Any other requirements are left to the participating lenders to decide. In general, lenders will outline additional criteria that small businesses must meet to get a 7(a) loan or another type of SBA loan, and these requirements are normally stringent. These requirements may include:

  • A good to excellent credit score (defined as any FICO score from 690 - 850)
  • The ability to put up collateral for the loan
  • No recent derogatory marks on credit history (bankruptcies, liens, foreclosures, etc.)
  • At least two years in business
  • Profitability in past one to two years
  • Minimum annual revenue

If you’re applying for a different SBA loan program, there may be different eligibility criteria. For example, qualifying for a Community Advantage loan is based on the borrower’s creditworthiness and the viability of the business idea and is not limited by the amount of collateral or revenue a business has. Disaster loans are only available to businesses that have been affected physically or economically by a declared disaster.

How to Apply for an SBA Loan

You typically need to apply in-person for an SBA loan at a local bank or credit union branch (though there are a few lenders that offer SBA loans through an online application process that we list below). You can find SBA lenders in your community by using the SBA LINC tool. When you apply for a 7(a) loan or any other SBA loan, you’ll need to provide the some or all of the following documents to your lender:

  • Personal background and financial statements
  • Business financial statements
  • Business license or certificate
  • Ownership or affiliation information
  • Personal and business income tax returns
  • Loan application history
  • Personal resume(s)
  • Business description and history
  • Commercial lease agreement

You’ll also need to provide these documents if you apply for an SBA loan online, through lenders like SmartBiz, Biz2Credit, Live Oak Bank and some SBA microlenders. The application and funding process for an SBA loan (with the exception of SBA Express loans) will usually take a few weeks to several months to complete.

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