Which SBA Loan Fits Your Situation? (2026)

Purchasing a Business

Use an SBA 7(a) term loan. Every business purchase is what the SBA calls a change of ownership, and SOP 50 10 8.1 does not let a CAPLine, an Export Working Capital loan or any revolving line pay for one, an SBA Express line included.^[1]

Your deal type sets the numbers. A first-time buyer, any asset purchase, or a purchase outside your four-digit industry group is an Initial Acquisition: 10% of the total project cost that cannot be reduced, and cash flow of at least 1.25 times the debt payments on the last full year or the 2-year average. An existing business that has operated two full fiscal years and purchases 100% of another in its industry group is a Business Expansion, at 1.15. A partner buyout has its own rules, covered below.

The loan amortizes over 10 years. If the building comes with the business, only the real estate portion of a blended 7(a) runs longer, up to 25 years, or the building can go in its own 504 loan. A smaller 7(a) Small or SBA Express loan follows the same purchase rules.

Ask your lender

• Which change-of-ownership type will you record for my deal?
• Is the cash flow test on the last full year or the 2-year average?
• If the price is above the valuation, how much more equity will I need?

Read next: Can You Use an SBA Loan to Buy a Business?, SBA Loan Down Payment, What Changed in SOP 50 10 8.1, and worked deals in the laundromat and liquor store guides. Check your number with the max purchase price calculator.

Starting a Business

A business operating 1 year or less is a start-up, and a 7(a) start-up puts in at least 10% of the total project cost.^[2] Your projections carry the cash flow test: 1.10 within 1 year on a 7(a) Small loan (up to $350,000), or 1.15 within 2 years on a Standard 7(a).

SBA Express leaves the down payment to the lender, while the start-up rule calls for 10%. Plan on at least 10%. For a building, a 504 asks a new business for 15%, or 20% when the property is special purpose.

Ask your lender

• Which program do you use for start-ups at my size?
• What do you want to see behind my projections?
• Does my experience in this industry change your answer?

Read next: SBA Startup Loans, plus start-up examples in the coffee shop and salon guides.

Purchasing or Building Your Building

Use a 504 or a 7(a), and only for a building your business occupies: at least 51% of an existing building, or 60% of new construction.^[3] Investment and rental property is not eligible.

A 504 splits the project three ways: a bank lends 50% or more, a Certified Development Company lends up to 40%, and you put in 10%, or 15% for a new business or a special purpose property, or 20% for both. A 7(a) is one loan with one lender, up to 25 years, and the lender sets the down payment unless the building comes with a business purchase or a start-up. Both test cash flow at 1.15.

Ask your lender

• Would you do this as a 504 with a CDC, or as a 7(a)?
• Is my property special purpose for the 504 contribution?
• How much of the building will you count as my space?

Read next: SBA 7(a) vs 504, SBA Loans for Your Building, and the car wash guide for a special purpose property.

Purchasing Equipment

A 7(a) finances equipment over generally 10 years, and up to 15 when the IRS useful life supports it. A 504 fits large equipment with a useful life of at least 10 years that stays at a fixed location.

Trucks, trailers and other vehicles go in a 7(a), never a 504. Outside a purchase or a start-up, the lender sets the down payment.

Ask your lender

• What term will you give, based on the equipment's useful life?
• How will you value the equipment as collateral?

Read next: the auto repair shop and trucking company guides.

Working Capital

A 7(a) term loan can carry working capital for up to 10 years. An SBA Express line of credit revolves, up to $500,000, for up to 10 years including the term-out, and the lender must find the credit is not available elsewhere on reasonable terms.

A 504 can never fund working capital. When half or more of a loan above $50,000 is working capital, the lender has to explain why in its file. If you sell on credit or carry inventory, ask about a Working Capital CAPLine. Manufacturers, wholesalers and food supply businesses can ask whether their lender makes MARC lines.

Ask your lender

• Would a term loan or a line of credit fit my cash cycle better?
• How long is the draw period, and how long is the term-out?

Read next: the coffee shop and HVAC and plumbing guides, which compare term loans and Express lines.

Seasonal Inventory or Receivables

A Seasonal CAPLine pays for the seasonal build-up of inventory and receivables, and is repaid as soon as the season's sales come in, with a 30-day clean-up period. You need at least 12 calendar months of operation and a definite seasonal pattern.

It cannot keep the business running through slow months, and it cannot refinance debt. Expect your lender to ask for month-by-month history of your seasonal need and a 12-month projection.

Ask your lender

• How will you size the line to my seasonal build-up?
• What clean-up period will the line have?

Read next: the landscaping business guide, a seasonal business worked step by step.

A Specific Contract (CAPLine)

A Contract CAPLine pays the costs of one or more specific contracts, including the overhead tied to them, and the contract's payments repay it. You need a record of completing similar contracts on time and at a profit.

It cannot pay for a contract where significant work has already begun, a business purchase, permanent working capital or equipment, and profit cannot be built into it. Expect the lender to ask the customer to acknowledge an assignment of the contract payments.

Ask your lender

• Will you need an assignment of the contract payments?
• How do draws follow the work on the contract?

Refinancing Business Debt

A 7(a) can refinance business debt that passes the SBA's tests. The debt must be current for the last 12 months, or its whole life if shorter. Common tests: the new payment is at least 10% lower, the old rate is above the SBA maximum, or the old term was too short for what it financed, like a 3-year loan on equipment with a 15-year life.^[4]

Factoring agreements cannot be refinanced. A merchant cash advance can only after it has become a term loan and amortized for 24 months. For building and long-life equipment debt, SBA 504 has Debt Refinance programs; your CDC confirms which one fits.

Ask your lender

• Does my debt pass the substantial benefit test?
• Should my building debt go in a 504 refinance instead?

Read next: SBA Loans for Your Building and the trucking company guide on factoring.

Partner Buyout

A 7(a) under the Owner Buyout rules. The buyer must already be an owner or have worked at the business at least 24 months. Anyone else may purchase less than 50% and cannot become the largest owner, or the deal falls under the Initial Acquisition rules.

The down payment is 10% of the purchase price, and the lender may lower or waive it when the business has enough liquidity and no negative net worth at its last fiscal year-end. Cash flow must be at least 1.25 times the debt payments, on a 10-year amortization. A selling partner who keeps less than 20% gives a full guaranty for at least 2 years.

Ask your lender

• Does my time at the business count toward the 24 months?
• Will you lower the 10%, and what would that cost me in working capital?

Read next: partner buyouts in the accounting firm and insurance agency guides.

A Second Location

Opening a new location is not a change of ownership, so the standard 7(a) rules apply: 1.15 cash flow (1.10 on a 7(a) Small loan), and a build-out term of 10 years plus up to 12 months to finish the work. A 504 can carry a building, and an existing business opening a new one in the same three-digit industry code with the same owners is not treated as a new business for the 504 contribution.

Purchasing a second location is a change of ownership. Only a purchase of 100% of the ownership of a business in your four-digit industry group, by a business with two full fiscal years behind it, is a Business Expansion at 1.15. An asset purchase is an Initial Acquisition at 1.25. Once leasehold improvements reach the lesser of $500,000 or 30% of the loan, the lender reviews your lease.

Ask your lender

• Will the new location borrow, or my existing business?
• Does my lease run as long as the loan?

Read next: the gym and liquor store guides, which each work a second location.

Very Small Needs: Microloans

An SBA Microloan goes up to $50,000 and must be repaid within 7 years.^[5] It comes from a nonprofit intermediary, not a bank, and pays for working capital, supplies, furniture, fixtures and equipment.

Intermediaries generally keep a Microloan to $10,000 or less, and the SBA does not review Microloans for creditworthiness, so the intermediary sets the terms. At $50,000 or less, a 7(a) Small loan needs no collateral and is the other option.

Ask the intermediary

• What is the most you lend to a business like mine?
• Do you require training or technical assistance with the loan?

Read next: SBA Startup Loans and the salon guide, which compares Microloans with 7(a) Small loans.

What Each Loan Costs Upfront (FY2027)

For 7(a) loans approved from October 1, 2026 to September 30, 2027, the upfront guaranty fee on the guaranteed portion is 2% for loans of $150,000 or less, 3% from $150,001 to $700,000, and 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% above that for larger loans. It is 0% for loans of $700,000 or less to manufacturers, listed food supply chain businesses and businesses in a rural area. A loan of 12 months or less pays 0.25%. The lender pays an annual service fee of 0.55% of the guaranteed balance and may not pass it on to you. (Source: SBA Information Notice 5000-881797.)

A 504 pays a 0.50% upfront guaranty fee and a 0.203% annual service fee, both waived for the same three groups (SBA Information Notice 5000-881796). Run your own number in the guaranty fee calculator.

Common Mistakes

• Planning a line of credit for a purchase. No SBA line can fund a change of ownership. The purchase needs a 7(a) term loan.
• Counting on a Seasonal CAPLine for slow months. It pays for the build-up before the season, not the quiet months after it.
• Choosing a 504 for working capital. A 504 pays only for fixed assets. Pair it with a 7(a) or a line of credit.
• Assuming a smaller loan has easier purchase rules. A 7(a) Small or SBA Express purchase keeps the 1.25 or 1.15 floor and the 10%.
• Calling a purchase an expansion. An asset purchase, or one outside your four-digit industry group, is an Initial Acquisition.
• Financing a building you mostly rent out. Your business has to occupy at least 51% of an existing building, 60% of a new one.

Free Calculators

• SBA Down Payment Calculator: Your minimum, and which sources count.
• Global DSCR Calculator: The business plus household cash flow test.
• SBA Loan Payment Calculator: Monthly payment by amount, rate and term.
• Max Purchase Price Calculator: What a business can support at 1.25 coverage.
• SBA Guaranty Fee Calculator: The FY2027 upfront fee on your loan.
• Collateral Calculator: How lenders discount what you pledge.

Related SBA Lending Guides

• Can You Use an SBA Loan to Buy a Business?, the purchase rules in plain words
• SBA Loan Requirements, every gate and every scored strength
• SBA Loan Down Payment, how much you put down by deal type
• SBA 7(a) vs 504, the two main programs side by side
• How Much Can You Borrow?, the program limits and what sizes your loan
• SBA Loan Rates, the 7(a) maximum rates by loan size
• SBA Loans by Industry, one guide per industry
• The FUNDED Series, one SBA lending guide per industry, with real deals worked step by step