SBA · 8 min read

SBA loans explained, and how to know if you qualify

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An SBA loan is not a loan from the government. It is a loan from a bank or approved lender where the U.S. Small Business Administration guarantees part of the balance, which lowers the lender's risk and, in turn, your rate.

01The programs that matter

• 7(a) — the general-purpose program: working capital, equipment, refinancing, acquisitions. Loan amounts run up to $5 million.
• 504 — for owner-occupied real estate and major fixed assets, structured through a lender plus a Certified Development Company. Total project sizes can run larger than a 7(a).
• Microloans — smaller amounts, generally up to $50,000, through nonprofit intermediaries.

02What makes them worth the paperwork

Rates are capped relative to a published base rate, and terms run long — often ten years for working capital and equipment, longer for real estate. The result is a materially smaller payment than revenue-based funding for the same dollars. If your business qualifies and your timeline allows, this is usually the cheapest capital available to you.

03What lenders look for

• A for-profit business operating in the United States that meets SBA size standards.
• Demonstrated ability to repay from business cash flow, shown in tax returns and financials.
• Reasonable owner credit, and typically a personal guarantee from owners of 20% or more.
• Owner equity in the business, and collateral where it is available.
• No delinquency on existing federal debt.

04What the process demands

Expect to produce business and personal tax returns, year-to-date financials, a debt schedule, ownership documentation, and a use-of-funds statement. Expect weeks, not days. The paperwork is the price of the rate.

05When to look elsewhere

Thin time in business, recent credit damage, an urgent gap, or a need that is too small to justify the process — in any of those cases a term loan, line of credit, or equipment financing will serve you better. There is no prize for qualifying for a product that arrives after the opportunity closes.

06Where we fit

We will tell you straight whether your file looks like an SBA file. If it does, that is worth pursuing, and we will say so even though the faster products are the ones that pay us sooner. If it does not, we will show you what you do qualify for today and what would have to change to qualify later.