SBA Loan: It’s not a government loan

The U.S. Small Business Administration has loan programs allowing you to borrow money for working capital, debt refinancing, M&A, commercial real estate or equipment financing.

The SBA doesn’t directly lend you money. A bank (or alternative lender) does the lending. The government guarantees a percentage of the loan to the banks, so banks are more willing to take a chance on lending to your business. This is the case even if your FICO score or the characteristics of your business aren’t exactly inside a bank’s typical lending criteria.

They are one of the cheapest forms of financing around – which is why almost everyone wants one. However, the process can take a while (measure it in months), so it’s not for those who are looking for quick cash to make payroll. If you’re patient and you have the time, it’s well worth the months it takes to get approved.

Summary of SBA loan types

Loan Type Typical uses
7a: Standard and Express Up to $5 million from an SBA-approved lender. (For expedited processing the 7a Express loan makes up to $350,000 available). This is the most common form of SBA financing.
7a: Advantage For historically underrepresented small business owners who otherwise would not qualify for a 7a Standard / Express loan
Microloan Startup financing up to $50,000, provided from a SBA-approved lender or community financing organization.
CDC/504 Big construction and real estate projects. Put down 10% yourself, borrow the rest from a bank and Cerfified Development Company
Disaster If your business was affected, physically and/or economically, from a natural disaster on the SBA’s list, use these forms of loans to get back on your feet.
Export Loans Offered to businesses wanting to start (or expand) exporting their products overseas

7a Standard and Express Loans

SBA provides loans to businesses – but your eligibility is based on your creditworthiness as a business owner. According to their website, the “key factors of eligibility are based on what the business does to receive its income, the character of its ownership and where the business operates.”

You need to

  • be in business to make money
  • do business primarily in the US
  • have used your personal resources before hitting lenders up for money
  • not owe any money to the government
  • be able to show that you have a plan for using the funds (and paying your lender back!)

… among other eligibility requirements. Assuming you’ve met these requirements and have pulled together an extensive application, then expect the following terms of your loan:

  • Amount: Up to $350,000 for an express loan. Up to $5 million for a standard loan.
  • Fees: A guarantee fee of 0% to 3.5%. Banks usually roll this fee into the interest rate they charge you.
  • Interest: Expect to pay between 8 and 10%. Interest rates are either fixed or variable. Your bank or alternative lender will determine what they want to offer. The SBA indicates a maximum ‘spread’ a bank can charge on your loan – ranging from 2.25% for loans less than 7 years, to 2.75% for loans more than seven year.
  • Repayment: Expect monthly payments for 25 years for real estate, 10 years for equipment, and generally up to 7 years for working capital.

7a Loans are cheap! Contact us and we’ll help you find a SBA specialist, free of charge.

7a Advantage Loans

The SBA designed the 7a advantage loan to help underserved communities get access to funding. If a business owner has basic SBA eligibility but can’t get a regular SBA loan because of low revenues or low collateral, they are eligible for the 7a advantage loan. They’ll even guarantee 85 % of the loan, up to a $250,000 loan. The SBA has more details on their site.


The SBA will provide up to $50,000 to help small businesses and not-for-profit daycares start up and expand. The average microloan is about $13,000.

Here are the top 25 microloan lenders

  • Amount: up to $50,000 for new small businesses
  • Fees: None
  • Interest: Rates range over 8 – 13%
  • Repayment: Maximum of 6 years, paid back monthly.

CDC / 504 Loans

CDC / 504 loans can be used for purchasing commercial real estate or major construction projects.

To be eligible, you need to have a good credit score, put down 10% of the project yourself, and create jobs in adherence with local public policy.

More on this point: The government asks that you show how many jobs will be created for every dollar that a bank lends to you. Depending on the size of your business, they may ask that you create / keep one job for every $100,000 that is loaned to you. If you don’t think you’ll be able to create jobs, you can also qualify by meeting other, more abstract community development goals.

The total size of your project can’t exceed $13 million.

  • Amount: $10 million or more.
  • Fees: 4% of the loan amount, and usually rolled into the interest rate the bank charges.
  • Interest: 5 to 7%. The loan is actually provided by the bank and a certified development company, and each one charges a slightly different rate based on who they sell a portfolio of these loans to.
  • Repayment: 10 to 20 years, paid back monthly.

Here is a list of CDCs that may partner with your bank for a CDC/504 loan.

Disaster Loans

The SBA has set up disaster loans to help small businesses recover their operations after they’ve been hit by a natural disaster. The small business must be located in an SBA-declared disaster area. Here’s a current list..

There are three kinds of loans they offer:

  1. Business Physical Disaster Loans
    • Can be used if your business has been physically damaged, and is located in a declared disaster area.
  2. Economic Injury Disaster Loans
    • Can be used if your small business has suffered economic damages (not necessarily physical) as a result of a disaster.
  3. Military Reservists Economic Injury Loans
    • Can be used if you have an essential employee who is called for active military duty and can’t meet your operating expenses. The government will limit how much they loan you if you were already insured for this reason.
  • Amount: up to $2 million
  • Fees: None
  • Interest: 4% for Military Reservist and Economic Injury loans. Around 4% to 7% for Business Physical Disaster loans.
  • Repayment: up to 30 years, paid monthly.

The SBA has an online application for you to use.


SBA CAPLines are their form of a short term loan to help you with your ‘working capital’ crunch. You basically use your accounts receivable or purchase orders as collateral for the loan. This is especially relevant to seasonal businesses, so you have to show how revenues fluctuate over time.

  • Amount: Up to $5 million
  • Fees: Rolled into interest rate
  • Interest: Same as 7a: 8 to 13%
  • Repayment: Seasonal and Builder’s Loans have 5 year maturity. The Contract loan has a 10 year maturity. Loans paid back monthly

According to the SBA website, there are four different programs.

  1. Contract Loan
    • A loan based on a purchase order. Can also be used as a revolving line of credit, similar to many alternative lenders, only less egregiously expensive.
  2. Seasonal Line of Credit
    • Loan to help you buy inventory or hire people. You have to have been in business for more than a year, and have evidence of seasonal revenue.
  3. Builders Line of Credit
    • Help small contractors flip / rehab real estate. You can use the loan to buy, construct or rehab the project, and the land costs can be included.
  4. Working Capital Line of Credit
    • A revolving line of credit (up to $5 million) that provides short-term working capital. There may be extra servicing and monitoring of the collateral for which the lender can charge additional fees to the borrower.

To learn more about CAPLines loans, click here

Export Loans

If you’ve got a business that exports goods and services to foreign countries, you can qualify for an SBA Export loan.

Your business should be one year old or more (even if you haven’t been exporting for a full year). Whichever bank or alternative lender you use can typically apply for this loan alongside or in lieu of the 7a loan.

There are three types of export loans:

These loans are a special kind of 7a loan – specifically earmarked for businesses that want to export goods overseas. The requirements and terms of these loans are similar to those of 7a loans.

Here’s a breakdown of each export loan.

The Export Express Loan

  • How it works: Provides up to $500,000 in financing for businesses that are at least 1 year old and export products overseas. If you’ve previously been in the exporting business, they’ll waive this requirement. This is like the SBA Express loan, so you’ll get a response within 36 hours.
  • Borrowing amounts: Up to $500,000. Pay back over 7 years or less.
  • Interest rates: Same as the SBA express loan – between 8 and 10%.

The Export Working Capital Loan

  • How it works: Financing to expand your manufacturing or invest into equipment used for international trade. The loan amount is based on your purchase orders from foreign customers, so think of this loan as a cheaper form of factoring.
  • Borrowing amounts: Borrow up to $5 million, pay back within a year (this is a short term loan, clearly!)
  • Interest rates: no maximum interest rate caps, but SBA monitors to make sure no one is getting screwed. Compare these rates to what a typical factoring company might charge.

International Trade Loan Program

  • How it works: Financing to expand or develop new export markets. This program was created to counteract the effects of import competition. So, you need to show how import competition is hurting your business, and how this program could help.
  • *Borrowing amounts**: Borrow up to $5 million, pay back over anywhere from 10 to 25 years.
  • Interest rates: between 6 to 8%.

The SBA has more details on their site..

Get paperwork in order

Here’s the list of items you need to get started with an SBA loan.

It’s a long list.

But, it will serve you well in your hunt for funding regardless of lender. Remember that a primary factor for SBA eligibility is your personal credit score. Everything else is important, but not as important as your own history of paying loans back.

  • Driver’s License
  • Voided Business Check (get a checking account first!)
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Credit Score (your SBA-approved bank will gather this for you)
  • Business Tax Returns
  • Personal Tax Returns
  • Business Plan
  • Business Debt Schedule – who you already owe, what the payment schedule is, and any special circumstances that would change your repayment schedule

Find a great small business lender

Deciding to embark on an SBA loan is not easy. We can help you make sure you’ve got your I’s dotted and your T’s crossed, so you don’t get tripped up by the application process. Get started now by dropping us a line.