A Comprehensive Guide to SBA Loans

When it comes time to finance your small business or its growth, many options are available — everything from a business line of credit to a small business loan.

Many small businesses turn to SBA loans in such scenarios. These bank loans are backed by the U.S. Small Business Administration (SBA). With an SBA loan, borrowers can work toward their goals, whether that’s getting a startup off the ground or expanding an established small business.

Let’s take a closer look at what an SBA loan is and how it works.

What Is an SBA Loan?

An SBA loan is a type of small business financing that is partially guaranteed by the U.S. Small Business Administration and offered by approved lenders such as banks, micro-lending institutions, and private lending companies. The SBA itself does not lend money directly but helps reduce risk to lending partners. With these types of loans, small business owners usually enjoy competitive rates and SBA loan terms, counseling, and education opportunities.

To apply for an SBA loan, you’ll need to find an SBA-approved lender. Lenders will differ depending on what SBA loan is desired. The lender will then assess your eligibility according to SBA requirements. If approved, you’ll receive a loan, and a percentage of the amount will be guaranteed by the SBA. This means that if you default on the loan, the SBA guarantees repayment to the lender, making SBA loans relatively low-risk — and appealing — for lenders and borrowers alike.

SBA loan eligibility requirements vary depending on the lender and the type of loan program. A few things lenders consider when assessing a potential borrower are:

•  How does the business receive income?

•  What is the character of its ownership?

•  Where does the business operate?

•  Does the business meet size standards?

•  Has the business received funds from another financial lender?

Additionally, lenders will look at a potential borrower’s creditworthiness. They assess personal credit and business credit (if established) to ensure that the potential borrower can responsibly repay the loan.

It may be possible for those with less-than-optimal credit to qualify for startup funding with certain SBA loan programs and lenders. Outside the SBA program, “bad credit” business loans are offered by many lenders. These typically carry higher interest rates because there is higher risk involved.

How Do SBA Loans Work?

SBA Loan Terms

Specific business loan terms under the SBA will depend on the lender and eligibility, but they generally fall between five and 25 years.

•  Working capital: 10 years

•  Equipment: 10 years (as long as it does not exceed the life of the equipment)

•  Inventory: 10 years

•  Real estate: 25 years

Certain SBA loans have special terms that may not follow the above criteria. They include:

•  504 loans: Loan terms can be 10, 20, or 25 years.

•  Microloans: Maximum maturity is seven years.

•  All CAPLine loans except the Builders CAPLine: Maximum maturity is 10 years.

•  Builders CAPLine loans: Maximum maturity is five years.

•  International Trade loans: Maximum maturity is 25 years.

•  Export Working Capital loans: Maximum maturity is typically 1 year, but can be up to 3.

Finally, the SBA offers longer maximum repayment periods on disaster loans:

•  Economic Injury Disaster Loan (EIDL): Maximum maturity is 30 years.

•  Business Physical Disaster Loan: Maximum maturity is 30 years.

•  Military Reservists Economic Injury Loan: Maximum maturity is 30 years.

SBA Loan Amounts

SBA financing programs offer a variety of loan amounts for small business owners. The exact approved amount for each borrower depends on the lender and eligibility. You can get an estimate of the amount your business may qualify for by using a SBA loan calculator. Below are the maximum loan amounts for different types of SBA loan programs:

•  Standard 7(a): $5 million.

•  7(a) Small loan: $350,000.

•  SBA Express: $500,000.

•  Export Express: $500,000.

•  Export Working Capital: $5 million.

•  International Trade: $5 million.

•  504 loan: Generally $5 million (qualified energy-efficient or manufacturing projects may receive as many as three loans, each up to $5.5 million)

•  Microloan: $50,000.

•  CAPLine loan: $5 million.

•  All disaster loans: $2 million.

SBA Interest Rates

Ultimately, interest rates on SBA loans are negotiated between the borrower and lender. The SBA provides some guidelines and rules around interest rates, which vary depending on the type of loan:

•   All 7(a) loans: Interest rates vary depending on the type of loan and what the daily peg rate is. As of September 2025, the maximum rate for fixed-interest loans of less than $25,000 is 15.5%. The top interest rate for loans of more than $250,000 is 12.5%. These figures are based on a prime rate of 7.5%.

•   504 loan: Interest rates are below-market and fixed for the life of the loan. In September 2025, rates ranged from 6.25% to 8.25%.

•   Microloan: Interest rates are typically between 8% and 13%.

•   Disaster loans: Interest rates are determined by law and each type of disaster loan has its own criteria:

◦   Economic Injury Disaster Loan (EIDL): Maximum interest rate for businesses is 4%.

◦   Business Physical Disaster Loan: Maximum interest rate is 4% if you aren’t able to obtain credit elsewhere; otherwise, 8% maximum.

◦   Military Reservists Economic Injury Disaster Loan (MREIDL): Interest rate is 4%.

Common Types of SBA Loans

There are multiple SBA financing options for small businesses. Faced with these choices, you’re likely to wonder how all the SBA loans work and which will be better for the type of business you have. The most common types of SBA loans include 7(a) loan programs, 504 loan programs, microloans, and SBA disaster loans.

SBA 7(a) Loans

If you own a small business and need manageable financing, SBA 7(a) loans for small business generally offer more favorable terms and rates than credit cards or business lines of credit. There are standard and small versions of this loan, allowing for flexibility based on your specific funding requirements.

Loan purpose: Can be used for working capital, purchasing equipment or inventory, refinancing existing debt, buying real estate, or funding business expansion.

Max loan amount: $5 million.

Repayment terms: Depends on the purpose of the loan. For working capital, for example, the term can be up to 10 years, while for real estate, it can be up to 25 years (including extensions).

SBA 504 Loans

SBA 504 loans are for small businesses looking to make significant investments in their infrastructure. They have favorable terms and conditions to support long-term business growth.

Loan purpose: Purchasing fixed assets like real estate, buildings, and machinery. They can also be used to construct, renovate, or improve facilities.

Max loan amount: $5 million ($5.5 million for certain energy-efficient or manufacturing projects).

Repayment terms: Range from 10 to 25 years, which helps keep monthly payments manageable.

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SBA Express Loans

SBA Express loans are ideal for small businesses that need quick access to capital. Their simplified application process makes them practical for addressing immediate financial needs.

Loan purpose: Provide small businesses with quick and flexible access to capital to meet various business needs.

Max loan amount: $500,000.

Repayment terms: Range from seven to 25 years depending on the loan’s purpose.

SBA Microloans

SBA microloans are small, short-term loans to help small businesses start up and expand.

Loan purpose: Can be used for working capital, inventory or supplies, furniture or fixtures, and machinery or equipment. They cannot be used to pay existing debts or to purchase real estate.

Max loan amount: $50,000.

Repayment terms: Maximum repayment period is seven years, with terms varying based on the loan amount, the planned use of funds, and the needs of the small business borrower.

SBA Disaster Loans

SBA disaster loans are low-interest loans meant to help businesses, homeowners, renters, and nonprofit organizations recover from declared disasters. These loans can be used to repair or replace property, cover operating expenses, and minimize property risks ahead of future disasters.

Loan purpose: Help repair or replace damaged property, cover operating expenses, and prevent future disaster risks.

Max loan amount: $2 million for businesses, $500,000 for homeowners to repair real estate, and $100,000 to replace personal property.

Repayment terms: Up to 30 years, with generally low interest rates. For loans over $50,000, collateral is required to the extent possible.

SBA CAPLines

SBA CAPLines are designed to help small businesses meet their short-term and cyclical working capital needs.

Loan purpose: Provide small businesses with short-term and cyclical working capital, financing for accounts receivable and inventory, and funding for contract-specific needs.

Max loan amount: $5 million.

Repayment terms: Up to 10 years, with specific terms depending on the type of CAPLine and the borrower’s needs.

SBA Export Working Capital Loans

SBA Export Working Capital loans are designed to help small businesses obtain the necessary working capital to support export sales.

Loan purpose: Provide working capital to small businesses to support export transactions — including financing for production, inventory, and accounts receivable — and cover standby letters of credit used as bid or performance bonds.

Max loan amount: $5 million.

Repayment terms: Typically 12 months or less, but can be renewed annually. Also, any individual owning 20% or more of the business must provide a personal guarantee.

International Trade Loans

SBA International Trade loans help small businesses engaged in international trade or those adversely affected by competition from imports.

Loan purpose: Provide financing to small businesses for expanding export activities, developing new export markets, or improving operations in response to import competition. This includes funding for working capital, equipment purchases, and real estate acquisition.

Max loan amount: $5 million.

Repayment terms: Up to 25 years for real estate, up to 10 years for equipment, and up to seven years for lines of credit.

Pros and Cons of SBA Loans

As with any business term loan, SBA loans have advantages and disadvantages. As they’re designed specifically for small businesses, they offer attractive rates and terms. Yet they can be more difficult to qualify for, especially if your business is fairly new.

Advantages of SBA Loans

•  Competitive rates: Interest rates may be lower than other types of small business loans.

•  Low fees: Minimal associated costs and charges.

•  Longer terms: Extended repayment periods make managing cash flow easier.

•  Large loan amounts: Access significant funding to support business growth.

•  Flexible use of funds: Support a variety of business needs.

•  Support available: Access resources and guidance from the SBA.

•  Lower down payments: Reduce the initial capital required to secure the loan.

Disadvantages of SBA Loans

•  Hard to qualify: Strict eligibility criteria can make approval challenging.

•  Slow to fund: Approval and funding process can be lengthy.

•  May require collateral: Assets are often needed to secure the loan.

•  Requires extensive documentation: Application process requires a significant amount of paperwork.

•  Personal guarantee: Borrowers must personally back the loan.

•  Prepayment penalties: Fees may apply for paying off the loan early.

SBA Loan Requirements

To get an SBA loan for a small business, companies must meet specific criteria and provide comprehensive documentation to show their creditworthiness and ability to repay the loan. The requirements are:

•  Business size: The business must meet the SBA’s size standards, which vary by industry and are typically defined by the number of employees or average annual receipts. The SBA generally considers a small business to be independently owned and operated and not dominant in its field.

•  For-profit business: The business must be a for-profit entity. Nonprofit organizations are generally not eligible for SBA loans.

•  Location: The business must be physically located and operate in the United States or its territories.

•  Owner’s equity investment: The business owners must have invested their own time or money into the business. This demonstrates the owners’ commitment and reduces the risk for lenders.

•  Good credit history: Both the business and its owners must have a good credit history. Lenders typically look for a strong personal credit score and a business credit profile.

•  Ability to repay: The business must demonstrate the ability to repay the loan. This is usually assessed through financial statements, cash flow projections, and other documentation that shows the business’s profitability and financial stability.

•  Collateral: While not always required for smaller loans, collateral is often required for larger SBA loans. This can include business assets, personal assets, or real estate.

•  No delinquent debt to the U.S. government: The business must not have any delinquent debt obligations to the U.S. government, such as unpaid taxes or federal loans in default.

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Tips for Improving Your Chances of Approval

Following these tips may help strengthen your SBA loan application.

1.   Approach banks you already work with. The SBA recommends seeking out a financial institution with which you already do business. That lender already has a clear picture of your financial history as well as insights into your character.

2.   Bolster your business plan. Lenders will likely want to see a clear description of your company and your plan for moving forward. Review your business plan to make sure it contains a solid overview along with detailed plans for management, financial affairs, marketing, and operations.

3.   Check your credit score. There’s no SBA loan credit score minimum, but lenders may have their own individual standards. They’ll likely evaluate both your personal and business credit scores, so you’ll want to make sure those reports are accurate. Request a free copy of all three personal credit reports (from Equifax, Experian, and TransUnion) and business credit scores (from Experian, Equifax, and Dun & Bradstreet) to double-check.

4.   Discuss changes in cash flow. Cash flow can reveal to lenders whether your business can handle a new loan payment on top of current operating expenses. Your application will likely need to present historical cash flow data as well as a 12-month projection to demonstrate the company.

5.   Consider using collateral. For SBA loans up to a certain amount (often $50,000), collateral isn’t required for approval. Even so, it may improve your chances, especially if your credit and cash flow aren’t ideal. Borrowers can secure an SBA loan using both personal and business assets. But there is some risk involved: You could lose that property in the event of default.

How to Apply for an SBA Loan

There are some application differences between conventional loans vs. SBA loans. Use this checklist to get a successful start on applying for your SBA loan.

1. Check Your Eligibility

SBA loans for small businesses require applicants to meet several requirements. They must adhere to the SBA’s size standards, which vary by industry. Only for-profit entities are eligible, and the business must operate within the United States or its territories. In addition, owners need to demonstrate their commitment by investing their own time or money into the business.

Further, both the business and its owners must have a good credit history. Their ability to repay the loan must be evident through financial statements and projections. While collateral is often required for larger loans, it may not be necessary for smaller ones.

Lastly, the business must not have any delinquent debt obligations to the U.S. government.

2. Choose a Lender

When selecting a lender for your SBA loan, it’s important to understand the difference between standard and preferred lenders. Standard lenders must submit the entire loan application and supporting documents to the SBA for approval, which can result in a longer approval process.

Preferred lenders, on the other hand, are part of the SBA’s Preferred Lender Program (PLP) and have the authority to approve loans on behalf of the SBA, typically leading to a faster approval process.

Some questions to ask prospective lenders:

•  What types of SBA loans do you offer?

•  Are you a standard or preferred SBA lender?

•  How long does your loan approval process typically take?

•  What are the interest rates and fees associated with your SBA loans?

•  What documentation will I need to provide for the loan application?

•  How do you handle ongoing support and communication after the loan is approved?

3. Gather Documents

Once you’re ready to apply, you’ll generally need to gather the following documents (the exact documentation you need might vary by the loan program and lender):

•  Business financial statements: Profit and loss statements, balance sheets, and cash flow statements for the last three years.

•  Personal financial statements: Financial statements of all owners with a 20% or greater ownership stake.

•  Business plan: A detailed business plan that includes market analysis, business model, and financial projections.

•  Personal and business tax returns: Tax returns for the last three years.

•  Loan application history: Information on any previous loan applications.

•  Résumé of principals: Background and experience of key business owners and managers.

•  Business license and certificates: Proof of business ownership and any necessary permits.

•  Lease agreements: If applicable, a copy of your business’s lease agreement.

•  Collateral documentation: Description of collateral being used to secure the loan, including appraisals if available.

•  Articles of incorporation or organization: Legal documents that establish the business entity.

4. Submit Your Application and Wait for Approval

The time it takes for an SBA loan application to be reviewed can vary. For standard lenders, the review process may take several weeks to a few months due to the need for SBA approval. Preferred lenders can often process and approve loans more quickly, sometimes within a few weeks, due to their delegated authority.

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What to Do If You’re Denied an SBA Loan

If at first you don’t succeed with an SBA loan, you still have options. You can try again after 90 days, and in the meantime, possibly cast a wider net as well.

Review the Denial Reasons

There are many reasons why an SBA loan application could be denied, and a lender who says no will typically provide an explanation. An applicant may run afoul of SBA’s eligibility requirements, or perhaps there was a mistake on the application. If the problem with your application can be solved, you may be able to do so by working with a mentor, a hired professional, or your would-be lender. After a 90-day waiting period, you can reapply.

Consider Alternative Funding Sources

You may decide to look at other options beyond SBA loans. Alternative funding sources include online lenders, business credit cards, business lines of credit, grants, crowdfunding, personal loans, and merchant cash advances, among others. See if the terms, conditions, and available amounts on offer align with your business needs.

The Takeaway

The SBA guarantees many types of small business loans with competitive rates and terms. Business owners can use the money for working capital, equipment, real estate, inventory, and other expenses. The demands of a lengthy application process and strict eligibility criteria are balanced out by lower interest rates and longer repayment periods. If a loan is denied, applicants can review the reasons, make improvements, and try again.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

What credit score is needed for an SBA loan?

A credit score of 680 or higher is typically required to qualify for an SBA loan, so maintaining good credit is crucial. Online lenders, though, may accept lower credit scores.

How long does it take to get approved for an SBA loan?

Once you’ve submitted your application and all necessary documents, the review process may take several weeks to a few months, pending SBA approval. If you’re working with one of the SBA’s preferred lenders, approval may come sooner, possibly even within a few weeks.

Can you apply for multiple SBA loans?

Yes, you can apply and be approved for multiple SBA 7(a) or 504 loans. But the total amount of SBA-backed financing you can receive is generally capped at $5 million.

What is an SBA loan used for?

Approved uses of SBA loans include:

•  Deploying working capital

•  Building or rehabbing real estate

•  Purchasing and installing inventory and equipment

•  Refinancing current debt

What happens if you default on an SBA loan?

Your lender will try to collect on the debt. After notifying you of your default status, the lender can seize and sell your collateral. Thanks to the SBA loan’s personal guarantee provisions, you may also face the loss and liquidation of personal assets.

If there’s additional unpaid debt, the SBA will give you 60 days to pay up. The SBA then transfers your account to the U.S. Treasury Department, which may garnish your wages and tax refunds or, potentially, file a lawsuit against you.

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