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An SBA loan is a small business loan that’s backed by the government. If your business can’t repay the loan, the government covers up to 85% of the cost.
The SBA sets caps on loan amounts, interest, fees, requirements and terms, making it a low-cost option for small businesses.
Here’s how SBA loans generally work:
To qualify for an SBA loan, your business must be:
Additional criteria comes down to the SBA program and lender. See our guide to SBA loan requirements for additional eligibility.
Choose from seven of the SBA’s most popular loan programs:
The SBA 7(a) loan program is by far the most popular program offered by the agency. It’s easy to find lenders that offer them, but they’re also more competitive than other programs.
The standard 7(a) loan doesn’t have any additional eligibility requirements, though your lender might. You may need to back your loan with collateral, depending on how much you borrow. You’re also required to provide a personal guarantee and down payment of around 20%.
SBA Express loans are a version of the standard 7(a) loan that you can get more quickly — the SBA takes just 36 hours to give a decision. It requires less paperwork, making it a strong choice for businesses that don’t have months to wait for financing. Use the funds for just about any purpose, including working capital and real estate.
The SBA also offers an Export Express loan of up to $500,000 for small businesses involved in international trade. Rates and terms are the same. However, the SBA guarantees up to 90% of Export Express loans and can process the application within a fast 24 hours.
Also called a 504/CDC loan, this program is specifically for businesses looking to expand. It works differently than your typical SBA loan because it actually comes from two lenders: a community development corporation (CDC) and a third-party lender (often a bank).
Your business must meet additional eligibility requirements and size standards. And the program is open to established businesses only, so startups need to look elsewhere.
The SBA CAPLine program offers both revolving and fixed lines of credit to small businesses. It works a lot like a 7(a) loan when it comes to rates, terms and fees. However, the four CAPLine programs restrict who qualifies and how you can use your funds:
The SBA microloan program is designed to offer startup funding and support to small businesses. It focuses on women, low-income, veteran and minority entrepreneurs.
Unlike other SBA programs, there’s no guarantee. Instead, the SBA lends money to nonprofit lenders at a discounted rate, which they pass on to borrowers. These loans are often found at community development financial institutions (CDFIs) and microlenders.
The SBA Community Advantage program is a pilot set for either expiration or extension by September 30, 2024. It’s designed to promote economic growth in underserved areas and markets. Community Advantage lenders tend to overlook factors like poor credit or low revenue as long as your business benefits an underserved area.
These loans are available through mission-driven lenders like CDCs and CDFIs only. Reach out to your local SBA office to find a lender near you.
The SBA disaster loan program is unique in a few ways: It’s the only loan program the SBA funds directly, and it’s available to both businesses and homeowners. It’s designed to help people recovering from a natural disaster like a hurricane or flood, and also provides funding for businesses that employ military reservists on active duty. You can apply for a disaster loan through the SBA website.
Other SBA loan programs can better fit the needs of smaller businesses or those that receive revenue from on international trade.
SBA 7(a) Small Loans | Similar to the 7(a) program but with a lower maximum amount | $350,000 | 9.5% | 5 to 25 years | 75% to 85% |
SBA International Trade | General-use financing for businesses actively involved in international trade or hurt by competition from imports | $5 million | 9.5% | Up to 25 years | 90% |
SBA Export Working Capital Program | Short-term working capital for exporters backed by invoices or other business assets | $5 million | No SBA rate cap | 1 to 3 years | 90% |
Find the right program for your business by asking yourself:
You can get an SBA loan from any type of lender, though you might want to work with a certified or preferred lender that offers a more streamlined application process.
Lenders that participate in the SBA’s Certified Lender Program (CLP) have experience with SBA loans and meet SBA standards.
The SBA expedites applications from certified lenders by reviewing its credit decision rather than underwriting the loan itself. For a 7(a) loan, this means cutting the underwriting process down to three days, instead of the standard five to 10 business days.
Lenders that participate in the SBA’s Preferred Lender Program (PLP) have the most experience working with the SBA and meet even more rigorous standards than certified lenders.
Preferred lenders have the authority to underwrite and set eligibility standards without the SBA’s application. For 7(a) loans, the SBA can give approval within 24 hours.
A few SBA programs offer financing through specific types of lenders:
Connection services can help you find an SBA preferred lender that your business can qualify with if you don’t know where to go first. Business lenders like SmartBiz also provide loan packaging services to further cut down the time it takes to apply for a loan.
Prepare to submit all or some of these documents when you apply for an SBA loan:
Not sure you can qualify and need funding fast? Consider an alternative lender for your business needs.
It’s hard to beat SBA loan rates and terms. But make sure you have the time to apply and meet the eligibility requirements.
Learn more about SBA loans, including eligibility and requirements.
An SBA guarantee is the government’s legal promise to cover part of the loan if your business defaults. The SBA typically guarantees between 75% and 85% of SBA loans, though it depends on the program and how much you borrow. Business owners that have more than a 20% stake in the company are required to back the rest of the loan with a personal guarantee or collateral.
SBA loan providers charge different rates depending on the specific program, loan amount and repayment term.
SBA loans are among the more difficult types of financing to qualify for. Only 54% of SBA applications were approved in 2017, according to a Federal Reserve survey. This could be because SBA loans consider far more factors than traditional business lenders, including the arrest records of business owners with more than a 20% stake in the company.
The time it takes to receive your SBA loan depends on several factors, including your lender and loan type. Most borrowers can expect to spend at least 30 days on the application from start to finish. However, it can take as little as a few weeks if you use a service like SmartBiz.
There’s more paperwork because SBA loans are backed by the government — or the public’s tax dollars. Extra regulations lead to extra paperwork and qualifications.
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