SBA Loans
SBA loans are partially guaranteed by the government and can provide your business up to $5 million in funding. Editorial note: Not all of LendingTree’s partners offer SBA loans. If you choose to get business loan offers through LendingTree, you may see results with different types of business loans.
What is an SBA loan?
The U.S. Small Business Administration (SBA) partners with banks, credit unions and online lenders to provide low-cost funding to businesses who struggle to qualify for traditional financing.
SBA loans are generally more affordable than other types of small business financing since the SBA guarantees up to 75% to 90% of the loan, helping reduce lender risk. The SBA also caps interest rates to keep your loan repayments from getting out of control.
You can use an SBA loan to cover various business expenses — from general operating costs to fixed assets like commercial real estate and equipment.
Types of SBA loans
The SBA program that’s right for your company will depend on the amount you’re seeking as well as the purpose of the loan.
| SBA loan program | Loan size | Term | Max. interest rates Based on the current prime rate of + a rate cap set by the SBA | Ideal for… |
|---|---|---|---|---|
| SBA 7(a) loans | Up to | Up to | Variable: Fixed: | General business financing |
| SBA CDC/504 loans | Up to | Up to | Approximately | Financing major fixed assets |
| SBA Express loans | Up to | Line of credit: Up to Real estate: Up to 300 months | Variable: Fixed: | Fast approvals (36 hours) |
| SBA Export Express loans | Up to | Up to if used as line of credit | Variable: Fixed: | Export companies requiring fast turnaround |
| SBA Export Working Capital | Up to | Up to if used as line of credit | Interest rate set by the lender — No SBA maximum | Export companies in need of working capital |
| SBA microloans | Up to | Up to | Generally between | Women, low-income, veteran and minority entrepreneurs requiring smaller loan amounts |
| SBA disaster loans | Up to | Up to |
| Small businesses affected by declared disasters |
| SBA CAPLines | Up to | Up to | Variable: Fixed: | Lines of credit for short-term or seasonal financing |
| SBA International Trade loans | Up to | Up to | Variable: Fixed: | Companies wanting long-term funding to keep up with foreign competitors |
SBA 7(a) loans
Ideal for general business financing
The SBA 7(a) loan is typically the most popular option in the
Repayment terms depend on the use of funds:
- 25 years for commercial real estate
- 10 years for equipment
- 10 years for working capital or inventory
Collateral may be required for loans exceeding $50,000. Interest rates may either be fixed or variable and are based on the federal prime rate.
SBA 7(a) variable loan interest rates
| Loan amount | Rate standard | Variable maximum allowable (with current prime rate) |
|---|---|---|
| $0 to $50,000 | Base* + 6.5% | |
| $50,001 to $250,000 | Base* + 6% | |
| $250,001 to $350,000 | Base* + 4.5% | |
| $350,000 or above | Base* + 3% |
According to the SBA, fixed interest rate 7(a) loans are based on the prime rate in effect on the first business day of the month of your loan.
SBA 7(a) fixed loan interest rates
| Loan amount | Fixed maximum allowable (with current prime rate) |
|---|---|
| $0 to $25,000 | |
| $25,000 to $50,000 | |
| $50,000 to $250,000 | |
| Over $250,000 |
Borrowers must also pay a guaranty fee, which would be a percentage of the loan amount. Fees range from 0% for veteran-owned businesses and loans under $1 million, and up to 3.75% for other borrowers.
SBA CDC/504 loans
Ideal for financing major fixed assets
The SBA 504 loan program combines funds from the SBA and Certified Development Companies (CDCs). These loans can be used to purchase fixed assets such as commercial land, buildings and fixed assets like machinery, and to finance construction projects related to commercial property.
Typically, the bank or financial institution provides 50% of the loan amount and the CDC (backed by the SBA) provides 40%, leaving you to contribute the final 10%. In some situations, you may have to contribute 20%.
versus the 7(a)’s lowest fixed rate of 13.5%. However, the 504 loan program has a job creation and retention requirement, which means you need to create or retain at least one job opportunity per every $90,000 guaranteed by the SBA.
SBA Express loans
Ideal for fast approvals
The SBA Express loan can be a good option for companies needing fast funds to cover urgent expenses. Borrowers typically receive a lending decision within 36 hours, compared to five to 10 days for SBA 7(a) loans.
However, the name “express” can be misleading — although these loans have quick turnaround times, it can take between 25 to 60 days for funds to be deposited into your bank account.
SBA Export Express loans
Ideal for export companies requiring fast turnarounds
Many U.S. lenders view export companies as risky businesses, making it challenging to get financing for short- and long-term expenses. Due to this need, the SBA created several options for export companies needing fast funds — including term loans and lines of credit.
The SBA Export Express loan can provide up to
Since you don’t need prior approval from the SBA, you can typically receive a response time within 24 hours. However, it can take up to 90 days after that to get your funds.
SBA Export Working Capital
Ideal for export companies in need of working capital
The Export Working Capital loan helps companies that generate export sales access the financing they need for working capital, suppliers, inventory and the production of export goods or services.
If you want to learn more about competing with the global market, you can reach out to a U.S. Export Assistance Center (USEAC) in your region.
SBA microloans
Ideal for women, low-income, veteran and minority entrepreneurs requiring smaller loan amounts
SBA microloans are issued to small businesses and nonprofit childcare facilities through nonprofit lenders and community-based organizations. These loans are available up to
The SBA microloan program primarily serves new or early stage businesses in underserved markets. Eligible borrowers include business owners with little to no credit history, low-income businesses, women-owned companies and minority entrepreneurs.
SBA disaster loans
Ideal for small businesses affected by declared disasters
Disaster loans differ from other SBA loans because the SBA provides disaster funds instead of guaranteeing loans made through intermediary lenders.
The SBA offers low-interest disaster loans to businesses, homeowners and renters in areas where a federally declared disaster occurs. Most disaster loans are available up to
Businesses of all sizes affected by the Hawaii wildfires can apply for financial assistance with the SBA, although the application filing deadline for economic injury is May 10, 2024, and the deadline for physical damage has already passed.
If your business was affected by Hurricane Idalia and is located in an eligible area in Florida and Georgia, you might qualify for an SBA disaster loan.
SBA CAPLines
Ideal for lines of credit for short-term or seasonal financing
An SBA line of credit, also called a CAPLine, can help your business cover seasonal or short-term working capital needs. In general, SBA CAPLines are cheaper than traditional business lines of credit. If approved, you can access up to
There are four types of SBA CAPLines to consider:
-
Working capital
Ideal for general business expenses, like paying rent, hiring staff, buying inventory. This is typically the easiest CAPLine to get, but it may come with extra fees. -
Contract
Can help businesses fulfill specific contracts, such as purchasing materials, paying for contract workers or custom orders. -
Seasonal
Ideal for covering seasonal changes, such as stocking up on time-sensitive inventory or hiring staff for busy seasons. -
Builders
Funds can be applied to help cover construction costs for residential or commercial property, such as hooking up utilities, professional landscaping, labor and materials and more.
Note that specific CAPLines may apply additional eligibility requirements — the builders line, for example, requires a track record of completing construction and/or renovation projects.
SBA International Trade loans
Ideal for companies wanting long-term funding to keep up with foreign competitors
An SBA International Trade loan can help U.S.-based companies develop or improve products and services to sell abroad. Financing goes up to
The main purpose of this loan is to help strengthen your business model so you can better compete in the global market.
Here are some examples of how you could use funds from an International Trade loan:
- Facility upgrades or expansions
- Equipment financing
- Participation in overseas trade shows
- Translation services
- Debt refinancing
Pros and cons of SBA loans
Not sure if an SBA loan is right for you? Consider the following pros and cons of SBA loans before moving forward.
Pros
-
Broad eligibility requirements
Companies unable to secure traditional financing might have better luck qualifying for an SBA loan. -
Capped interest rates
The SBA sets maximum business loan interest rates based on the prime rate to help make loans affordable for small business owners. -
Access to SBA resource centers
Small business owners can access resources, training and support via a local SBA resource branch. -
Wide range of funding amounts
Small business owners can borrow from $500 to $5 million and beyond to cover a range of expenses. -
Longer terms
SBA repayment terms can go as high as 360 months, versus up to 84 months as seen with other types of small business financing.
Cons
-
Down payment typically required
Lenders typically require a 10% to 30% SBA down payment to secure the funds. -
Collateral and/or personal guarantee could be required
Many SBA lenders require borrowers to provide collateral and/or a personal guarantee to help reduce lender risk. -
Long funding process
The approval and funding timeline can take up to 60 to 90 days, whereas some online lenders offer same-day business loans. -
Not ideal for low-credit borrowers
Borrowers typically have better chances of approval with a personal FICO Score of 680 or higher.
Requirements for an SBA loan
Eligible small businesses must meet the SBA’s size standards, which are based on annual receipts or number of employees, depending on industry.
Borrowers also need to meet the basic SBA loan requirements:
- Be a for-profit business
- Be physically located and operating in the U.S.
- Have invested personal equity in the business
- Have exhausted all other financing options (though you may qualify for an SBA loan if you have other business debt)
- Meet the job creation and retention requirement for SBA 504/CDC loans (must create or retain at least one job opportunity per every $90,000 guaranteed by the SBA)
Having a personal credit score of at least 680 with a business history of two or three years can improve your chances of qualifying for an SBA loan. However, new businesses that have been operating for less than two years can consider an SBA microloan for startup financing.
You are personally responsible for the debt: If your business defaults on an SBA loan, you would personally be on the hook to repay it if you own at least 20% of the business. And if you pledged any collateral, your lender could seize and liquidate those assets and apply the value to your remaining balance.
Seek assistance when you need it: If you need help navigating the application process and requirements, you can turn to a Small Business Development Center (SBDC) in your area. The national network of SBDCs operate in partnership with the SBA to provide no- or low-cost assistance to small business owners.
How to get an SBA loan
How to get an SBA loan
While the SBA oversees the SBA loan program, it doesn’t issue funds directly, and the application process can be extensive.
You must apply through a bank, credit union or alternative lender that offers SBA loans. Both the lender and the SBA need to review your application before approving your loan, though some lenders may have authority to independently approve SBA business loans.
To apply for an SBA loan:
1. Find a local lender
The SBA’s Lender Match tool connects prospective borrowers with SBA loan lenders in their area. The tool could provide a starting point when searching for lenders, though you’re not guaranteed to get matched. But if you do receive interest from various banks, be sure to ask about their specific rates, terms and fees, as banks can set their own costs within the SBA’s limits.
Before speaking with lenders, you should have an idea of how much you’d like to borrow and how you would use the money. It would also be best to determine ahead of time if you have any assets you could use to collateralize your loan, if needed.
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2. Choose the type of loan
You have multiple options when it comes to types of SBA loans for small businesses. Picking the best one depends on your business’s unique needs.
If you plan to purchase or renovate commercial real estate, a CDC/504 loan could be a good choice. However, a 7(a) loan is better suited for companies needing to cover general operating expenses. And if you’re pressed for time or need to cover emergency expenses, the SBA Express Loan could be a good fit.
If you’re unsure which option is best for you, talk with your lender about the various SBA loans available.
3. Gather documents
The SBA application requires a number of forms and documents. While the exact requirements vary by lender and loan type, here are some standard forms you will likely need:
- Your SBA loan application form (SBA Form 1919)
- Personal financial statement (SBA Form 413)
- Business plan
- Current business income statement and balance sheet
- Business tax returns for the previous three years
- Cash flow projections (month-by-month, for one year)
- Real estate purchase agreements (when buying real estate with SBA loan proceeds)
- Articles of organization
- Business licenses and registrations
- Collateral information
- Documentation of any lawsuits, judgments or bankruptcies
4. Apply and review
Having a mentor or business advisor review your SBA loan application before submitting can help strengthen your application and ensure you have all required documents included.
You can typically submit an SBA loan application online, although some traditional banks might require a phone call or in-person appointment.
If approved, the lender will need to get the SBA’s approval before moving forward. During this stage, you might need to submit additional documentation. Remember, some lenders are able to approve SBA loans without this extra step.
You will then receive a business loan agreement outlining your loan’s conditions and terms. Be sure to thoroughly review this document and ask your lender for clarification if you don’t understand any of the legal terms.
The SBA application and approval process can be quite lengthy, taking approximately 30 to 60 days to process and fund, or up to 90 days for real estate loans. If your business needs money fast, you may want to consider shopping for a business loan from an online lender. While these lenders can approve and fund your loans in as little as one to three business days, you’ll likely pay a higher interest rate with shorter repayment terms. Another option is to work with an SBA Preferred lender, which can shorten your wait time to just two weeks instead of several months.
Alternatives to SBA loans
While an SBA small business loan can help many businesses access the funds they need to take their companies to the next level, it might not be the best fit for you. If you can’t meet the SBA loan qualifications or need a shorter timeline, you may want to consider other lending options.
| Loan type | Ideal for… | Amounts | Terms | Average interest rates | Time to funding |
|---|---|---|---|---|---|
| Short-term online loans | Short-term and low-cost expenses like inventory, equipment, payroll and marketing campaigns | $2,000 to $1.5 million | 3 to 24 months | 3% to 60.9% | Same day to 3 business days |
| Lines of credit | Unexpected or ongoing business expenses, such as inventory, payroll or seasonal fluctuations in revenue | $1,000 to $250,000 | 3 to 60 months | 3% to 39.90% | 1 to 14 business days |
| Business credit cards | Short-term or daily expenses that can be paid off within the month | Varies based on your credit profile | Ongoing | 13.24% to 35.99% (Some cards have 0% intro APR offers) | 7 to 14 days |
| Invoice factoring | Companies wanting to use their unpaid invoices to receive quick cash advances | Up to $30 million | Not applicable | Starting factor fees (discount rate) 0.55% to 8.25% | Same day to 48 hours |