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Compare SBA startup loan options

Government-backed loans can help your business early on, but they're not for getting off the ground.

SBA loans are available to small businesses in the startup phase, as long as they've already started operating. Small businesses tend to use SBA loans when they're stable enough to borrow but are too small or haven't been around long enough to qualify for a bank loan.

SBA loans for startups

There's no single best SBA loan program for startups. But new businesses can benefit from these programs the most. The right one for your business depends on why you need the loan, who you serve and where your business is located.

SBA microloans

  • Maximum loan amount: $50,000
  • Maximum interest rate: Typically between 8% and 13%
  • Terms: Maximum term of six years
  • Percentage guaranteed: 0%
  • Where to get it: Microlenders, Community Development Financial Institutions (CDFIs) and other intermediaries

SBA microloans are generally the most startup-friendly option when it comes to government-backed loans. You can find a microloan through nonprofit lenders, which receive the funds from the SBA at a discounted rate.

It's a little more expensive than other SBA loans, but it can be easier to qualify for. Especially if you've borrowed from or taken courses with a microlender that participates in the SBA program. Just be ready to put up some kind of collateral and sign a personal guarantee.

SBA 7(a) loans

  • Maximum loan amount: $5 million
  • Maximum interest rate: 8%
  • Terms: Five to 25 years
  • Percentage guaranteed: 75% to 85%
  • Where to get it: SBA-approved lenders

An SBA 7(a) loan can cover most business expenses, including working capital, refinancing debt, buying equipment and other expenses. You can also use them to help your business grow during the startup phase.

These loans can be a good next step after an SBA microloan, which is often easier to qualify for. But unlike microloans, SBA 7(a) loans are available through banks, credit unions, online lenders and other providers that the SBA has approved to offer loans.

SBA Community Advantage loans

  • Maximum loan amount: $250,000
  • Maximum interest rate: 10.75%
  • Terms: Up to 25 years
  • Percentage guaranteed: 75% to 85%
  • Where to get it: Nonprofit lenders, like certified development companies (CDCs) and CDFIs

The SBA Community Advantage loan program, or CA, is a pilot program targeting underserved businesses and markets. Businesses in areas that traditionally lack financial resources can qualify, even with bad credit or low revenue — as long as they serve their communities.

These are usually available through local nonprofit lenders, like CDFIs or a CDC.

SBA Express loans

  • Maximum loan amount: $350,000
  • Maximum interest rate: 9.75%
  • Terms: Five to 25 years
  • Percentage guaranteed: 50%
  • Where to get it: SBA-approved lenders

The SBA's Express loan program is a faster version of a 7(a) loan — but with higher rates, a lower SBA guarantee and a lower maximum loan amount. Since it's more expensive than a 7(a) loan, save this for when you don't have the time or resources to complete a full 7(a) application.

Like 7(a) loans, Express loans are also available through SBA-approved lenders. But they're not as common.

SBA 504 loans

  • Maximum loan amount: $5 million
  • Maximum interest rate: 11% on bank portion
  • Terms: 10 or 20 years
  • Percentage guaranteed: 30% to 40%
  • Where to get it: SBA-approved lenders and CDCs

You can use an SBA 504 loan to buy equipment or real estate. It's usually best for when you need funds to increase production or move to a larger space. Due to the size and financial investment required for these loans, recent startups might have difficulty qualifying.

504 loans are funded by an SBA lender and a CDC. And they're only partly guaranteed by the SBA. Often, you can get started on your 504 application with an SBA lender.

SBA credit score requirements

You often need a credit score of at least 620 or 640 to get an SBA loan, which is just shy of good credit. But it depends on the program you apply for. CA and microlenders typically have lower credit requirements than banks offering 7(a) loans, for example.

Is it hard to get approved for an SBA loan as a startup?

Yes, it can be hard for a new business to get approved for an SBA loan. SBA loans often have some of the lowest approval rates out there.

Many SBA lenders also require at least three years in business and good credit to qualify for a loan. That's why newer businesses might want to start with a microloan or CA loan before applying to other programs.

SBA assistance during COVID-19

The SBA has several initiatives to help small businesses struggling during the coronavirus outbreak — including startups.

  • Paycheck Protection Program (PPP) loans are available to startups that were established before February 15, 2020. Use our guide to find a lender that offers PPP loans to apply for this coronavirus assistance program.
  • Economic Injury Disaster Loans (EIDL) are available to businesses that were established as of January 31, 2020. You can apply for an EIDL on the SBA website.
  • The SBA temporarily reduced fees and increased guarantees until October 1, 2021 for some loan programs, thanks to the second stimulus bill.
  • The SBA is also covering three to eight months of interest and principal payments on new and current loans as part of an SBA debt relief program.

Compare SBA lenders that can help you fund your startup

Select the amount of funding you want, time in business, revenue and credit score range to view your personalized options.

Name Product Filter Values Loan amount APR Requirements

Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★

Lendio business loans
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.

ROK Financial business loans
Finder Rating: 4.7 / 5: ★★★★★

ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.

Seek Business Capital loans
Finder Rating: 4.5 / 5: ★★★★★

Seek Business Capital loans
$5,000 – $500,000
Varies by lender
Personal credit of 680+, no bankruptcies in the last 4 years.
Startups and newer businesses could qualify for loans and credit cards with a custom financing package.

SmartBiz business loans
Finder Rating: 4.5 / 5: ★★★★★

SmartBiz business loans
$30,000 – $5,000,000
4.75% to 7%
650+ personal credit score, US citizen or permanent resident, 2+ years in business, $50,000+ annual revenue, no outstanding tax liens, no bankruptcies or foreclosures in past 3 years
Get funding for your small business with a government-backed loan and extended repayment terms.
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Compare up to 4 providers

Do SBA loans require collateral?

The SBA requires collateral on most loans, though it depends on the program and size of the loan.

  • SBA microloans usually require collateral and a personal guarantee, though it depends on your lender's policies.
  • SBA 7(a) loans under $25,000 don't require any collateral.
  • SBA 7(a) loans from $25,000 to $350,000 come with collateral requirements that your lender has in place for non-SBA loans.
  • SBA 7(a) loans over $350,000 must be fully collateralized, either with collateral or a lien on the business owner's personal real estate.
  • Community Advantage loans of $25,000 or less require a lien on the asset you want to use the loan to fund at a minimum.
  • Community Advantage loans over $25,000 and up to $250,000 need collateral based on the lender's policies for non-SBA loans.

Depending on the size of your loan and the loan program, you might need to get some or all of your collateral appraised.

5 alternatives to SBA startup loans

If you don't have the revenue, credit or time in business to get an SBA loan, consider these options instead.

  1. Personal loans are one of the most common ways for entrepreneurs to get a business off the ground. But you usually need to have a good credit score of over 670 and few other personal debts to qualify.
  2. Community banks may offer startup loans, usually backed by the business owner's personal assets. And like with a personal loan, you need good credit and regular income to qualify.
  3. Microlenders often offer seed money to entrepreneurs and loans to startups in the early stages — even if you have bad credit. But you often need to enroll in a training course as part of your loan contract.
  4. Crowdfunding a new product through sites like GoFundMe or Kickstarter can be a great way to fund while also advertising your business.
  5. Merchant cash advances offer an advance on future sales, sometimes with time in business requirements as low as three months. But watch out for high fees and daily repayments that can result in APRs over 300%.

Get more ideas on how to fund your startup with our guide to startup loans.

Bottom line

You can't use an SBA loan to launch a new business. But these government-backed loans can be useful when you're stable enough to repay a loan but too green to qualify at a bank. Compare our picks for the best business loans to learn about more options.

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