Small Business Administration Loans (SBA) – Everything What You Need About It

Small Business Administration Loans (SBA) – Everything What You Need About It

What is an SBA Loan?

The U.S. Small Business Administration helps small business owners get funding through SBA loans. With their multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender. The three main SBA loan programs let you borrow money for nearly any business purpose—including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate—through these SBA-guaranteed loans.


  • Lowest down payments
  • Longest payment terms
  • Reasonable interest rates
  • Suitable for a wide range of business purposes


  • Lengthy paperwork
  • Longer approval times
  • May require collateral


Compared to other loan types:

Loan types Max amount Interest rate Speed
SBA Loan $5K – $5M Starting at 6.75% As fast as 3 weeks
Term Loan $25K to $500K 7 – 30% As fast as 2 days
Business Line of Credit $10K to over $1M 7% – 25% As fast as 1 day
Invoice Financing Up to 100% of equipment value 8 – 30% As little as 1 day
Small Business Startup Loan $150K 7.9 – 19.9% As fast as 2 weeks
Equipment Financing Up to 100% of equipment value 8 – 30% As fast as 2 days
Short-Term Loan $2.5K – $250K Starting at 10% As fast as 1 day
Merchant Cash Advance $2.5K – $250K 1.14 – 1.18 As little as 2 days
Personal Loan for Business $35K 5.99 – 36% APR As fast as 1 day

Who Qualifies for an SBA Loan?

Securing an SBA loan is no easy feat…

So how can you get one?

As it turns out, many businesses—including small or newer ones—can qualify for an SBA loan. The most important factor will be your credit score: SBA loans are for business owners with strong borrowing histories.

Be prepared: SBA loans usually require a lot of time, energy, attention, and documentation.

Don’t believe any lender who promises to provide SBA loans today: It’s definitely not a loan that you’ll apply to and receive the funding for even within a few days. That said, SBA loans are certainly fit for growing your business and refinancing your other debt at the lowest available rates.

You might find it difficult to qualify for an SBA loan if your company has a limited track record or, especially, if your credit is poor. After all, the SBA and your lender are sticking their neck out on the belief that you’re a reliable borrower.

How to Apply?

Applying for an SBA Loan

While SBA loans are slightly easier to qualify for than bank loans, remember: you’re still working with a bank in the end. And banks are nothing if not slow. At plenty of major banks, getting an SBA loan can still be a lengthy, complicated process. Lenders want to review your credit and financial statements, and could expect you to have collateral to secure the loan. They’ll also look at a handful of other documents—from legal documents, to business plans.

Even with the government guarantee on their side, many small businesses don’t wind up qualifying for SBA loans. And if they do, the process could take months. On the other hand, an SBA loan’s low interest rates and long repayment terms are almost always worth the wait.

What is the actual application like? Here’s the deal:

When applying for SBA financing, you can expect to complete an extensive loan application. You’ll need to provide documents like financial statements, information on your collateral, a description of your business, and a statement of how you’ll use the loan proceeds, among others.

The participating bank will look for applicants with great credit, a solid business plan, and a demonstrated ability to repay the loan. Your borrowing history is especially important to the bank you’re working with for an SBA loan.

There are many large and local banks that offer SBA loans. These bank lenders will have extensive loan applications, looking closely at the financial details of your business. At a minimum, an SBA loan application at a traditional bank will take a couple of weeks to process.

For an easier and quicker process, you can apply online to top SBA lenders like Celtic Bank and Live Oak Bank.

Documents you need:
  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Business Tax Returns
  • Personal Tax Returns
  • Business Plan
  • Business Debt Schedule

How Do SBA Loans Work?

Almost every small business owner wants to know how to qualify for an SBA loan. As one of the lowest-cost products out there, SBA loans are the holy grail when it comes to growing your business affordably.

But aren’t they impossible to get approved for?

At Fundera, we’ve helped thousands of small business owners successfully secure SBA loans. With all that experience—and data—under our belt, we’re confident we can give you the information you need to apply for an SBA loan.

By understanding how the product works and what exactly the eligibility requirements are, you’ll know if an SBA loan is the right product for your business.

SBA Loans: The Fundamentals:

The Small Business Administration is a federal agency dedicated to helping entrepreneurs improve their small businesses, take advantage of contracting opportunities, and get better access to small business loans. We’ll focus on the last one here.

The most common misconception about SBA loans is that the agency lends money to businesses.

But actually, that’s not true—the SBA doesn’t directly lend money to businesses. So what is an “SBA loan” if not a loan from the SBA?

Instead, SBA loans are bank loans that are guaranteed by the SBA.

The SBA uses federal money to guarantee a percentage of loans administered by traditional banks, so those financial institutions have more incentive to lend money to small businesses.

Simply put, the SBA backs up a portion of the bank’s small business loan, meaning less risk for lenders. And less risk for lenders means that more small business owners will be considered for the traditional longer-term, lower-rate financing that comes from banks.

Because of this guarantee, bankers are more inclined to lend you money even if you don’t fit their strict credit criteria. They can service a whole different set of customers than usual—without making too many sacrifices.

How to Choose the Right SBA Loan Program

There are many different types of SBA loans out there, with 3 programs being the most popular:

  • The 7(a) Loan Program
  • The Microloan Program
  • The CDC/504 Loan Program
How do you know which one is right for you?

The SBA loan program you’ll want to apply for depends on the size, age, and goals of your business.

The most popular program is the SBA 7(a) loan, which works best for most businesses with general financing needs—like expanding working capital, refinancing old debt, or renovating a location. Here are the details of an SBA 7(a) loan:

  • Up to $5M in loan amount
  • Repayment terms of up to 7 years (for working capital loans) or up to 25 years (for commercial real estate loans)
  • For general business financing needs

The CDC/504 loan is another popular program, but a little more specific: A CDC/504 loan is used to purchase major fixed assets—mostly large equipment and commercial real estate. Here are the details of a CDC/504 loan:

  • Up to $5.5M in loan amount
  • Repayment terms of 10 or 20 years
  • For the purchase of major fixed assets

Finally, the third popular SBA loan program is the Microloan program. The SBA offers microloans to small or newer businesses searching for loans under $50K. Here are the details of SBA microloans:

  • Up to $50K in loan amount
  • Repayment terms of up to 6 years
  • For starting or expanding a small or newer business

If you’re feeling unsure about which SBA loan makes sense, Fundera can walk you through your options and help you decide which program is right for you—and whether you’ll qualify.

And if you’re not there yet, we’ll work with you to graduate your business up to an SBA loan—one of the longest-term and most affordable business loan options out there.

What Will An SBA Loan Cost You?

What’s the bottom line for your business’s bottom line? How much will an SBA loan cost?

Well, the cost and repayment of your SBA loan depends on the program you choose. Here are the fees, interest rates, and repayment terms usually associated with each of SBA’s most popular loan programs.

7(a) SBA Loan Program


A guarantee fee of 0 – 3.5%, based on your loan’s maturity and the dollar amount guaranteed, might be included in the total cost of the loan.

(Remember: the SBA isn’t lending to you directly—and it doesn’t guarantee 100% of the bank’s loan. That’s why “dollar amount guaranteed” is different from “total loan amount.”)

The SBA charges a guarantee fee for the service of guaranteeing the loan. The lender originally pays the guarantee fee, but it also can just pass that expense on to the borrower. These fees range from 0% for loans under $150K and up to 3.5% on loans of more than $700K. (There’s also an additional fee of 0.25% on any guaranteed portion of more than $1 million.)

Some partnered banks might also charge an origination fee or a loan packaging fee, depending on which banks you’re working with.

While the fees seem to make up a fair amount of money, these fees don’t hold a candle to the amount of cash you’re saving by taking on an SBA loan instead of something smaller, faster, and more expensive.

Interest Rates

Maximum of 2.75% + Prime Rate (typically between 5 – 10%).

7(a) SBA loans come with interest rates in either fixed or variable (typically adjusted quarterly) varieties. Your bank lender determines which it will offer.

To protect borrowers, the SBA puts a ceiling on 7(a) loan rates by limiting the “spread” a bank is allowed to apply on top of the loan’s base interest rate.

In other words, the SBA restricts how much a bank can make off your SBA loan.

If your loan term is less than 7 years, the maximum spread will be at most 2.25%. For longer loans, that spread increases to 2.75%.

With the current Prime Rate tacked on, you’ll likely end up paying a rate between 6% and 13%.

Like all types of loans, the interest rate you end up paying depends on your credit score and the length of your repayment term.


Up to 7 years for working capital loans, 10 years for equipment loans, and 25 years for commercial real estate loans.

What would a 7(a) SBA loan mean for your business’s cash flow? You can expect monthly payments for 25 years for real estate, 10 years for equipment, and generally up to 7 years for working capital.

Keep in mind: these are the longest terms you’ll find, giving you plenty of time to figure out how to make each payment and spreading those large loan amounts over many years.

CDC/504 SBA Loan Program


CDC / 504 SBA loan fees are usually about 3 % of the loan amount—and can sometimes be financed with the loan.

Also, be aware that you’ll need to put around 10% of your purchase down to secure 504 SBA financing.


Typically 5 – 6 %.

The SBA’s 504 loan program is one of the most complicated financing products out there.

We’ll give you the short and long of it.

The short story: You can probably expect an interest rate of 5 – 6% on your loan. You won’t know the exact rate until roughly 45 days after the fact, though.

The long story, in case you’re curious: The 504 loan program involves two individual loans—one from a bank (which is 50% of the loan) and one facilitated by a Certified Development Corporation (which is usually 40% of the loan). The latter gets grouped together when all CDCs pool their projects, and through underwriters, auction the pool to investors.

On the one hand, that means you don’t get to know the exact rate until the sale of the pool, which is approximately 45 days after you’ve closed with the CDC.

On the other, historically speaking, you’re pretty set for a pool rate between 4 – 5%. When blended with your bank rate, the total should come out to around 5 – 6%.

It’s complicated, but you don’t really need to worry: it all gets handled automatically.


Maturity terms of 10 and 20 years with the 504 SBA loan program.

Microloan Program



There are no fees associated with microloans.


Rates range over 8 – 13 % for the microloan program.

Microloans are administered by partnering financial institutions. 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.

You can expect an interest rate of 8 – 13% on all microloans.


Up to 6 years with monthly repayments.

Loan repayment terms depend on the loan amount, use of funding, and other criteria, but the maximum repayment term allowed for an SBA microloan is 6 years.

As for the repayment schedule: like with other SBA loans, you can expect monthly charges.

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