SBA Loans: A Small Business Guide

An SBA loan may be your best small business loan option, if you can qualify.
Last updated Dec. 17, 2024
Advertiser Disclosure

What Is an SBA Loan?

SBA loans are small business loans partially guaranteed by the U.S. Small Business Administration and funded by SBA-approved lenders.
The main SBA loan programs—7(a), CDC/504, and microloan—let you borrow money for nearly any business purpose, including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate.
SBA loans offer low interest rates and long repayment terms, making them one of the most desirable types of business financing on the market. However, they are generally slower to fund and require a lengthy application.

How much do you need?

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application

SBA Loan Types

The SBA has a number of different loan programs. The one you’ll want to apply for depends on the size, age, and goals of your business. These four options tend to be the most common.

SBA 7(a) Loans

Best for: General business financing needs
The SBA 7(a) loan program is the SBA’s main loan program. SBA 7(a) loans are available in amounts up to $5 million and come in many types, including SBA Express loans and CAPLines working capital credit lines.
This SBA loan is highly sought after because the capital can be put toward a wide range of business purposes, and the interest rates and terms are some of the most competitive available to small businesses.
SBA 7(a) loans come with either fixed or variable interest rates (typically adjusted quarterly), determined by each SBA-approved lender. Your interest rate depends on your credit score and the length of your repayment term. To protect borrowers, the SBA restricts how much a lender can make off your SBA loan.

Rates10.75% to 15.75% (using prime rate of 7.75%), dependent on loan size and fixed or variable spread.
TermsMonthly payments for up to 10 years (equipment and working capital) or 25 years (real estate).
FeesGuarantee fee ranging from 0.25% to 3.75% of the guaranteed portion of the loan. Some lenders may also charge an origination fee or a loan packaging fee.

SBA Express Loans

Best for: General business financing needs
SBA Express loans are part of the 7(a) loan program, but they can typically fund faster than 7(a) loans. Like 7(a) loans, Express loans come in the form of term loans or lines of credit. Unlike 7(a) loans, they max out at $500,000.
If you borrow less than $50,000, you won’t be required to put up collateral. SBA Express loans also involve a guarantee fee (though this fee is waived for eligible businesses owned by veterans).

Rates10.75% to 15.75%, depending on fixed or variable spread (the majority tend to be variable).
TermsMonthly payments for up to 10 years (working capital, equipment, and lines of credit) or 25 years (real estate).
FeesOne-time guarantee fee based on the loan amount. Some lenders may charge additional fees.

SBA CDC/504 Loans

Best for: Purchase of major fixed assets, like land, buildings, large equipment, and machinery
An SBA CDC/504 loan is used specifically to purchase fixed assets, upgrade existing assets, or purchase real estate. This type of loan is funded by certified development companies (CDC) and other lenders.
Typically with a 504 loan, a bank or credit union extends half the total loan amount, SBA-approved CDCs extend 40% of the loan amount, and the borrower covers the remaining 10% as a down payment. These loans are available in amounts ranging from $25,000 to $5 million, though certain projects can be eligible for up to $5.5 million.
The rates on the CDC portion of the loan are subject to SBA rules. The bank portion of the loan, however, is not subject to SBA regulation. You’ll receive a rate based on your business’s qualifications, and you’ll be able to negotiate your rate with the bank.

RatesUsually ~5% to 7% of the amount financed, for the CDC portion of the loan.
TermsMonthly payments for either a 10-, 20-, or 25-year term.
FeesOften about 3% of the loan amount and can sometimes be financed with the loan.

SBA Microloans

Best for: Starting or expanding a new business
An SBA microloan is a loan of up to $50,000 from an intermediary nonprofit to a small business or startup. The money originates from the SBA, which initially lends the money at a discounted rate to the intermediary. The institution you work with is the one that sets the interest rate on the microloan, depending on your creditworthiness and the specifics of your small business.
Businesses can use SBA microloans for a range of purposes, including working capital or buying equipment, machinery, or supplies. And while these SBA loans often require collateral, they do come with slightly more accessible requirements, including a lower minimum credit score and the opportunity to be considered even if you’ve been in business less than two years.

RatesTypically range between 8% to 13%.
Terms7 years is the maximum repayment term allowed.
FeesUp to 3% of the loan amount in fees (up to 2% for loans with terms of less than one year) plus closing costs.

Who Qualifies for an SBA Loan?

*Based on past Fundera customers
Dollar bills with pink background.
Annual RevenueOver $180K
Calculator and invoice with pink background.
Credit Score660
Invoice with blue background.
Time in BusinessOver 3 years

Pros and Cons of SBA Loans

Pros

Although the interest rates on SBA loans will vary based on your business’s qualifications, the SBA sets guidelines on the maximum rates a lender can charge. Therefore, aside from bank loans themselves, it’s hard to find more affordable financing than SBA loans.
With SBA loans, repayment terms typically range from 10 to 25 years—so you don’t have to worry about payments cutting into your business’s cash flow. Plus, SBA loans are repaid on a monthly schedule, which is often preferable to the daily or weekly repayment schedule required by some other lenders.
SBA 504/CDC loans aside, one of the biggest benefits of SBA 7(a) loans and SBA microloans is they can be used for virtually any business purpose. This gives you flexibility with your funds, although you should always have a plan for your financing before applying for a loan.
Not all SBA loans have down payments, but those that often require them—SBA 7(a) and SBA CDC/504 loans—usually ask for 10% of the total amount you’re borrowing. This is a fairly low down payment, considering that other lenders may require up to a 20% down payment (or up to 30% for a commercial real estate loan).

Cons

Although SBA loans can be easier to access than bank loans, you’ll still need to meet fairly high-level criteria to qualify. For most SBA loans, you’ll need at least a few years in business, strong annual revenue, and excellent personal credit. If you’re a newer business, SBA microloans may offer more flexible requirements.
SBA loans require a document-heavy application that includes several SBA-specific forms, among other paperwork. Because many SBA lenders are banks, they don’t always offer online applications and you may have to visit a branch location to apply in-person. In addition, the underwriting and approval process is notoriously slow. It can take anywhere from 30 to 90 days.
The SBA expects that all loans are secured in some way—which means your lender may require that you offer up collateral on your loan. These requirements will vary based on the type of loan and the lender, but all SBA loans will require a personal guarantee from anyone who owns 20% or more of the business.

How to Apply for an SBA Loan

The SBA loan application process can be lengthy and complicated. You’ll need to provide several SBA-specific forms along with multiple business and personal documents, including the following:
  • Business overview.
  • Business license.
  • Resume for each owner.
  • Record of previous loan applications.
  • Income statements.
  • Balance sheets.
  • Business and personal tax returns.
  • Business debt schedule.
The participating lender will look for applicants with good credit, a solid business plan, a record of profitability (most of the time, not always), and a demonstrated ability to repay the loan. Your borrowing history is especially important to the lender you work with for an SBA loan.

Fundera Can Help

Curious to see what kind of small business financing you qualify for? Fill out one simple application with Fundera, and we’ll show you your options. This won’t impact your credit score, and there’s no obligation to get your funding through one of our partners.
Let’s get you funded!

How much do you need?

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application

Frequently asked questions

Of the SBA loan types available, SBA microloans have the lowest qualification requirements. Lenders that participate in the SBA microloan program typically look for a minimum FICO score of 620 or higher (compared with the 650 minimum required to qualify for an Express loan or the 690 minimum required for a 7(a) loan). SBA microloan lenders will also consider businesses with less than two years of history, whereas lenders of other SBA loan types generally will not.

Requirements vary a bit by lender and SBA loan program. In addition to requiring a good personal credit score and history along with at least two to three years in business, the SBA has a list of several additional requirements:

Be a U.S.-based, for-profit business.

Prove that the owner has invested time and/or money into the business.

Prove the need and intended use of the funds.

Demonstrate creditworthiness.

Meet the SBA’s definition of a small business.

Tried and failed to get funding elsewhere before applying for an SBA loan.