What Is an SBA Loan?
An SBA loan is a small business loan partially guaranteed by the U.S. Small Business Administration. The SBA doesn't lend money directly to businesses. Instead, it partners with approved lenders—banks, credit unions, and CDCs—and guarantees a portion of their loans. This guarantee reduces the lender's risk, which means they can offer better terms to borrowers who might not qualify for conventional financing.
The SBA guarantee covers 75-85% of loans up to $5 million, depending on the program. If a borrower defaults, the SBA pays the lender the guaranteed portion, making lenders more willing to work with small businesses, startups, and industries they might otherwise avoid.
Types of SBA Loans
SBA 7(a) Loans
The 7(a) program is the SBA's flagship loan program and the most flexible option. Loans up to $5 million can be used for:
- Business acquisitions
- Commercial real estate purchase or construction
- Equipment and inventory
- Working capital
- Debt refinancing
Terms range from 10 years (working capital) to 25 years (real estate). Interest rates are capped at Prime + 2.25% to Prime + 2.75% depending on loan size and term. The SBA guarantees 85% of loans up to $150,000 and 75% of larger loans.
SBA 504 Loans
The 504 program is designed for major fixed asset purchases—real estate and heavy equipment. It involves three parties:
- 50% Conventional lender provides first mortgage
- 40% Certified Development Company (CDC) provides second position
- 10% Borrower provides down payment
The CDC portion has a fixed rate locked at approval, making 504 loans attractive when rates are rising. Maximum loan amounts are $5.5 million for most businesses, with higher limits for energy projects.
SBA Microloans
Small loans up to $50,000 provided through nonprofit intermediary lenders. Designed for startups and small businesses that need modest capital. Terms up to 6 years, rates typically 8-13%.
SBA Express Loans
Faster turnaround—lenders can make credit decisions without SBA review. Maximum $500,000 with 50% guarantee. Good for borrowers who need speed over maximum loan size.
SBA Loan Comparison
| Feature | 7(a) | 504 | Express | Microloan |
|---|---|---|---|---|
| Max Amount | $5M | $5.5M | $500K | $50K |
| SBA Guarantee | 75-85% | CDC portion | 50% | None (intermediary) |
| Down Payment | 10-20% | 10-20% | 10-20% | Varies |
| Term (RE) | 25 years | 20-25 years | 25 years | N/A |
| Best For | Flexibility | Fixed assets | Speed | Small amounts |
Who Qualifies for SBA Loans?
To be eligible for an SBA loan, your business must meet these basic requirements:
Operating legally in the U.S.
Generally under $15M tangible net worth
Owner stake in the business
Exhausted other financing options
Current on all federal obligations
No recent bankruptcies or criminal convictions
Beyond SBA eligibility, you must also meet your lender's requirements for credit score, experience, cash flow, and collateral.
How Do You Apply for an SBA Loan?
The SBA loan application process typically takes 60-90 days from start to funding. Here are the key steps:
How to Apply for an SBA Loan
- 1
Prepare your documents
Gather 3 years of tax returns, current financial statements, a business plan, and your personal financial statement (SBA Form 413).
- 2
Find an SBA Preferred Lender
Preferred Lenders can approve loans without SBA review, cutting weeks off the timeline. Search the SBA Lender Match tool or ask your bank.
- 3
Submit your application package
Include SBA Form 1919 (borrower information), your business plan, financial projections, and all supporting documents.
- 4
Complete lender credit analysis
The lender evaluates your credit score, cash flow (DSCR), collateral, management experience, and deal structure.
- 5
Receive SBA authorization
For non-Preferred Lenders, the SBA reviews and approves the guarantee. Preferred Lenders handle this in-house.
- 6
Close and fund
Sign loan documents, satisfy any closing conditions, and receive your funds. The SBA guarantee fee is typically financed into the loan.
- 7
Get industry-specific guidance
Every industry faces unique requirements. The FUNDED series covers the exact process for restaurants, hotels, and franchises with real deal examples.
Need the full walkthrough with real deal numbers and lender insider tips?
Get the FUNDED SeriesCurrent SBA Loan Rates (2026)
SBA 7(a) loan rates are based on the Prime Rate plus a spread. As of January 2026:
Variable Rates
Prime + 2.25-2.75%
Fixed Rates
Available (higher)
504 CDC Portion
Fixed at approval
Your actual rate depends on loan amount, term, and lender policies.
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