SBA loans

What is an SBA loan?

The SBA does not lend money directly, except in disasters. It guarantees 50% to 85% of a loan made by a bank, credit union or nonprofit lender, so if you default the lender recovers most of its money from the government. In exchange the SBA caps rates and fees and sets rules on who qualifies.

For you, that means the cheapest and longest financing a small business can get. It also means two underwriters, a personal guarantee from every 20% owner, and a larger file than any other product.

Which SBA loan fits your situation?

Use the 7(a) loan for almost anything: working capital, buying a business, refinancing, equipment or real estate. Use the 504 loan for a building or heavy equipment when you want a fixed rate with 10% down. Use SBA Express for under $500,000 with a faster decision, including a revolving line. Use an SBA microloan for under $50,000 when you are too new or too small for a bank. Weighing 7(a) against 504 for a property? Our 7(a) versus 504 comparison works the numbers.

Who qualifies for an SBA loan?

The SBA rules are broad: a for profit US business within size standards, whose owners have invested their own money and cannot get the same credit elsewhere on reasonable terms. Lenders add their own bars, and those decide most outcomes.

• Most SBA lenders want two years in business, owner credit of 680 or higher, and a DSCR of 1.25 or better on the last tax return.
• Startups can qualify with 10% to 30% of the project in cash and relevant experience, but far fewer lenders will look.
• Common declines: recent bankruptcy, unpaid federal taxes, a prior default on government debt, or certain criminal history.

What do SBA loans really cost?

Interest is capped, but fees are not zero. A typical example: a $500,000 7(a) loan over ten years at prime plus 2.75%, about 9.75% with prime near 7%, costs roughly $6,540 a month and about $285,000 in interest over the full term. The SBA adds a guarantee fee of 0% to 3.75% of the guaranteed portion, depending on loan size and the year's schedule, and lenders often add packaging fees of $2,000 to $5,000.

Most 7(a) rates are variable and move with prime. The 504 CDC portion is fixed. Model your loan with the SBA loan calculator.

How do you qualify, and what documents do you need?

Assemble the file before you talk to a lender: three years of business and personal tax returns, year to date financial statements, a debt schedule, a personal financial statement for each owner, a short business plan or use of funds, and the SBA forms your lender provides. Purchases add the purchase agreement and the seller's financials.

The full list is in our document checklist. Fix two things first: any unpaid federal tax, which disqualifies you until it is on a payment plan, and owner credit below 680, which most SBA lenders treat as a hard stop.

How long does an SBA loan take?

Typically 30 to 90 days from a complete application to funding for 7(a), and 45 to 120 days for 504 because a bank and a CDC are both involved. Express loans get an SBA decision within 36 hours, but the lender's own underwriting and closing still take two to six weeks. Microloans typically close in two to six weeks.

Lenders with SBA preferred status approve in house, which cuts weeks off. See how long business loans take for what else speeds things up.

When should you choose something else?

Choose a conventional term loan if you need money inside 30 days or qualify for bank rates without the guarantee, which saves the SBA fee. Choose equipment financing for a single machine or vehicle; it closes in days and the equipment is the collateral. In Canada, the Canada Small Business Financing Program and BDC fill the same role, with their own limits and fees.

Skip the SBA if the money would cover ongoing losses. A decline after 60 days of work is worse than never applying.

How do you apply for an SBA loan?

Apply once on this site and your application reaches SBA lenders that match your industry, size and purpose, alongside conventional lenders that might be faster. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our MCP server: it reads your returns and statements, fills the application and submits it.