Grow your small business with government-backed financing you can afford.
You’ve started your small business or finally nailed down your plan, and now you need capital to grow. Being a business owner means being on top of technological changes and new trends in your industry, which can require an investment. Sometimes that investment is time, sometimes it’s money and sometimes it’s both.
The US Small Business Administration (SBA) provides programs that can help get you the funding you need to take your business to the next level. Rather than supplying the loans itself, the government sets out a series of guidelines that, when followed, lets lenders benefit from a guarantee on the loan. Being guaranteed not to lose money gives lenders the peace of mind needed to lend to you when they might not have otherwise.
If you’re interested in finding out more about SBA loans, our guide explains the ins and outs of how they work and discusses what to compare when weighing your options.
SmartBiz SBA Loans
Get funding for your small business with low monthly payments, extended repayment terms and competitive rates.
- Min. Loan Amount: $30,000
- Max. Loan Amount: $5,000,000
- Low starting APR: 6.36%
- Min. Loan Term: 10 years
- Max Loan Term: 25 years
- Must have been in business 2+ yrs w/ annual revenue of $50,000+ and personal credit score of 600+
What is an SBA loan?
An SBA loan follows a series of guidelines put forth by the US Small Business Administration. These loans for small, independently owned businesses are especially helpful to those that wouldn’t normally qualify for a traditional bank loan.
Several SBA programs are in place to serve different business needs. Such programs include those for military members, basic loans used to grow your business, disaster assistance and international trade. There are a dozen programs in all, so it’s likely you can find one that fits what your business requires.
How do SBA loans work?
An SBA loan is not provided by the government, and it is not a grant. Rather, the Small Business Administration provides a guarantee to lenders that offer SBA loans. That guarantee is a percentage of the loan the government promises to pay back in the event that you default.
That doesn’t mean that you’re off the hook if you don’t pay back the loan. Collections can still be initiated, and default will damage your credit. Likewise, if you’ve provided collateral, that collateral can be taken away so the lender can recoup the missed payments.
Functionally, an SBA loan acts like any other loan to the borrower, except there’s a little more red tape and a slightly more stringent qualification process.
Which businesses can benefit from SBA loans?
Businesses that need working capital and are looking to grow stand to gain from taking out an SBA loan.
However, you and your business will need to meet a few guidelines. First, you must be able to demonstrate a reason and exhaust all other financial resources before seeking assistance. You also cannot be delinquent on any existing debt owed to the US government, and loan funds must be for legitimate business purposes.
Other eligibility criteria includes:
- Your business must be for profit.
- You must have established a place of business in the US.
- You must primarily operate inside the US or make a contribution to the US economy.
- Your business must be independently owned and operated.
- You must have reasonable invested equity.
You must also meet size standards that you can calculate using the SBA’s online size standards tool.
Who are the top lenders offering SBA loans?
Here are 100 top SBA loan lenders:
Compare SBA loans from top providers
In addition to banks, some online business lenders offer SBA loans you may qualify for. Check out some of your options below:
What types of SBA loans are available?
Basic 7(a) Loan Program
The 7(a) is the most widely used of the SBA loan programs. You can do many things with the funds from an SBA 7(a) loan, including purchase land, purchase equipment, refinance debt, buy an existing business and much more.
Though terms are set by the borrower and the lender, the SBA puts some restrictions in place. You must meet general eligibility, and your loan cannot exceed $5 million.
Guarantees made by the SBA come with a fee.
|Less than $150,000||Less than 1 year||0%|
|More than $150,000||Less than 1 year||0.25% of the SBA guaranteed portion of the loan|
|$150,000–$700,000||More than 1 year||3% of the SBA guaranteed portion of the loan|
|More than $700,000||More than 1 year||3.5% of the SBA guaranteed portion of the loan|
Any guaranteed portion in excess of $1 million will incur an additional 0.25% added to the cost of the fee.
Certified Development Company (CDC) 504 Loan Program
The SBA certifies and regulates CDCs, which are nonprofit corporations. These companies support 504 loans by providing a percentage toward the loan. The remaining portions of the loan are covered by the lender and the borrower.
That means that you must contribute to the project up front. Often that contribution is 10%, but it can be up to 20% of the total cost.
Funds from a 504 loan may be used to obtain fixed assets. Assets can include real estate purchases, construction of new sites, the purchase of long-term machinery and more. Some soft costs associated with acquiring assets may also be covered.
The SBA now offers 504 loans with 25-year terms
The SBA 7(a) program might be the most popular type of government-backed business loan, but the SBA is working to shine some light on its other options for small business owners. How is it doing this? In April 2018, the administration extended its maximum loan term from 20 to 25 years. Lengthening the loan term cuts down on its short-term costs by allowing business owners to spread their repayments out over a longer period of time. The move can also potentially help more business owners qualify and allows for more flexibility.
Microloans are designed specifically for startups and expansions. The maximum for these loans is $50,000, hence the name. Repayment terms cannot exceed six years, and interest rates can vary between 8% and 13%.
Funding can be used as working capital or to purchase inventory, supplies, furniture, fixtures, machinery and equipment. It can’t be used, however, for existing debts or real estate.
Physical Disaster Assistance Loans
Disaster loans are specifically designed to cover the physical fallout from a disaster. You can borrow up to $2 million, and it’s possible to qualify for both disaster assistance and economic injury loans.
Uninsured or underinsured physical losses are both covered under disaster loans. Interest rates may not exceed 4% annually, and the repayment term must not exceed 30 years.
Economic Injury Disaster Loans (EIDL)
You can borrow up to $2 million in the event of severe economic injury in a declared disaster area. Severe economic injury is defined as being unable to meet obligations and pay necessary expenses to maintain operation.
Interest rates for these loans must not exceed 4% annually, and the repayment term must not exceed 30 years. If you also take out a disaster assistance loan, the combined amount of funding must not exceed $2 million.
Export Express Loan Program
Export express financing can be either a loan or a line of credit. In either case, it’s used for export development.
Funding maxes out at $500,000, and approval from the SBA is given in 36 hours or less.
Export Working Capital Program (EWCP)
EWCP is intended to help provide financing where lenders generally won’t. SBA manages this by guaranteeing up to 90% of the loan amount.
With the EWCP you can get financing for suppliers, inventor or production; working capital during long payment cycles; allowance of more liberal sale terms; and more.
International Trade Loans
Approved 7(a) lenders may underwrite these loans. They’re for amounts up to $5 million for the expansion of existing and development of new export markets.
Military Reservist Economic Injury Disaster Loan (MREIDL)
When an essential active duty or reservist employee is called away on duty and necessary operating expenses are unable to be met because of it, you can apply for a MREIDL. Typically $2 million is the limit, and loans over $50,000 require collateral.
The interest rate is a fixed 4%, and repayment terms must not exceed 30 years.
Specifically designed to help small businesses meet short-term capital needs, CAPlines offer four loan programs, each with specific uses, terms, rates and maximums.
Pollution Control Loans
Pollution control loans are 7(a) loans that can be used for fixed assets only. They are limited to assets that are intended to reduce the environmental impact of the business.
US Community Adjustment and Investment Program (CAIP)
Areas where business has been harmed by the North American Free Trade Agreement (NAFTA) are the main target of CAIP. One job must be created for every $70,000 guaranteed by SBA for 7(a) loans. That amount goes down to $65,000 for 504 loans.
Benefits and drawbacks of SBA loans
- Long repayment terms
- Competitive interest rates
- Specialized programs available to fit your business’s unique needs
- Longer application process
- May evaluate your personal credit
- May require collateral to secure the loan