SBA Loans: Types, Rates & Requirements

The Small Business Administration (SBA) guarantees business loans issued by approved lenders. SBA loans, though difficult to qualify for, carry low interest rates up to 11% with terms up to 25 years. The six types of SBA loans are 7(a) loans, community development corporation (CDC)/504 loans, CAPLines, export loans, microloans, and disaster loans.

Our recommended SBA loan provider is SmartBiz. They offer SBA 7(a) loans up to $350,000 for working capital and $5 million for CRE. If you have been in business two or more years, are profitable, and have a credit score above 680, you can prequalify online in just a few minutes.

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6 SBA Loan Programs

The six types of SBA loans are:

1. SBA 7(a) Loans

SBA 7(a) loans are the most common type of SBA financing. These loans go up to $5 million and can be used for working capital, to refinance debt, or to buy a business, real estate, or equipment. Two popular loans, the SBA Express Loan and SBA Advantage Loan, are part of the 7(a) loan program.

SBA 7(a) loans are right for most businesses looking to finance their working capital needs. These loans are what most people are referring to when they ask about SBA loans, and can be used for almost any business purpose. SBA loans are popular because of their long repayment terms and low interest rates, which make 7(a) loans one of the most affordable working capital solutions.

SBA 7(a) Loans at a Glance

*Last updated: August 2019

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SBA 7(a) Loan Interest Rates & Terms

SBA 7(a) loans offer a variety of programs you can utilize that have a variety of uses. All of the rates and terms are similar, with small variations, such as the amount you can borrow.

Let’s take a look at typical SBA 7(a) costs and terms:

SBA 7(a) Loan Rates

The typical SBA 7(a) loan interest rates and fees are:

• Interest rates: 2.25% to 4.75% plus prime rate, typically 5% to 10%, but you can check the current SBA loan rates
• Origination fee: 0.5% to 3.5%
• Loan packaging fee: $2,000 to $4,000
• SBA guarantee fee: 2% to 3.5%

The SBA 7(a) loan rates depend on a variety of factors, such as your credit score and the length of the repayment term, and it could be fixed or variable. The SBA limits the rate that lenders can charge for an SBA 7(a) loan with a maximum rate set at 2.25% to 4.75% plus the prime rate.

SBA 7(a) Loan Terms

The typical SBA 7(a) loan terms are:

• Loan amount: Up to $5 million
• Repayment terms: Up to 10 years to 25 years for commercial real estate
• Repayment cycle: Monthly
• Time to funding: 30 to 90 days or more

While the SBA does not set a minimum loan amount, most lenders will not consider loans that are less than $30,000. You can try out our SBA loan calculator to estimate what your monthly payments would be with an SBA 7(a) loan, depending on the loan amount and repayment term you’re targeting.

SBA 7(a) Loan Requirements

SBA 7(a) loans are available to both startups and more established small businesses, and have a variety of eligibility requirements. These SBA loan eligibility requirements include being a small business located in the United States, able to demonstrate the need for the loan proceeds, your industry, and the citizenship status of your owners.

To qualify for an SBA 7(a) loan, you will generally need to meet these minimum requirements:

• Credit score: At least 680 (check your score for free)
• Other SBA loan requirements: No recent bankruptcies, foreclosures, or tax liens
• Collateral: While the SBA will not refuse to guarantee a loan due to insufficient collateral, a lender is less likely to approve a loan that isn’t backed by sufficient collateral; loans of less than $25,000 don’t need to be collateralized
• Down payment: At least 10% down payment if you are using the loan to purchase a business, commercial real estate, or equipment

Startups seeking an SBA loan will need to meet the above requirements, plus they should have:

• Demonstrated experience: Startups need to show the lender they have sufficient industry or business management experience and provide a strong business plan. Your business plan will need to have a detailed written analysis, and you’ll also need to provide financial projections for your business’ performance over the next three to five years.
• Larger down payment: Perhaps the largest hurdle for startups is that most SBA lenders will require an equity injection or down payment of at least a 20% to 30% of your total project costs, or $20 to $30 for every $100 you want to borrow.
• Excellent credit: In our experience, it is very difficult for anyone other than the best borrowers—credit score of at least 700, high net worth, and real estate with significant equity—to get approved for SBA financing as a startup; if this is you, then you should read our article on how to get an SBA startup loan.

Guidant Financial can help startups put together their SBA loan applications. In addition, Guidant helps startup businesses find the lenders most likely to work with them and develop creative ways to meet the down payment requirements. The process starts with a free startup loan consultation.

If you’ve been in business for two or more years, have a credit score of at least 680, and are profitable, then you could qualify for an SBA 7(a) loan from SmartBiz, our recommended SBA loan provider. You can prequalify online in less than five minutes and get funded in as quickly as 30 days.

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How to Apply for an SBA 7(a) Loan

Applying for SBA financing is a time-consuming and complicated process. It will take many trips to your bank or lender and requires an extensive list of documentation. Generally, an SBA loan can take 45 to 90 days or more before you even get funded, if you’re approved at all. You can learn about the step-by-step process by reading our article on how to apply for an SBA loan.

When asked for tips on applying for an SBA 7(a) loan, Gary Gomulinksi, Executive Vice President of Commercial and Industrial Banking with Alpine Bank, said:

“When searching for a good SBA lender, ask the bankers you are considering a few simple questions. First, how many SBA 7(a) loans have they gotten approved in the last 12 months. Then, follow up and ask if any of those SBA 7(a) loans were to businesses in your industry. Knowing that the banker you’re about to work with understands your industry and has a proven track record should help in narrowing your search.”

When applying for an SBA loan, it’s important to find a lender that is not only well-versed in these loans, but one that originates many of these loans. This will increase your chances of getting funded and save you time and energy from applying with multiple lenders. Celtic Bank is a reputable direct lender that offers competitive rates on SBA loans above $350K. Take advantage of all the benefits of working with a direct lender, such as higher approval rates, by getting started online today.

If you need a smaller SBA loan of under $350K, we recommend the streamlined process at SmartBiz. Instead of waiting for months to get funded, SmartBiz can help you get the funds you need in as quickly as 30 days. They can prequalify you through a simple online application that takes only a few minutes.

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SBA Express Loan Program

One drawback of the standard SBA 7(a) loan is that the application process can take months. To address this problem, the SBA offers an expedited processing service called the SBA Express Loan, which guarantees a response to an application from the SBA within 36 hours. (Note: This means the SBA will notify your lender within 36 hours if your application has been approved, but it may take significantly longer for your lender to process and fund your loan.)

The SBA Express Loan generally follows the same guidelines as the standard SBA 7(a) loan, but the maximum loan amount is $350,000, and only select lenders are qualified to participate. The SBA guarantees a maximum of 50% for SBA Express loans, which means the interest rates on an SBA Express loan can be a bit higher than other 7(a) loans.

SBA 7(a) Advantage Loans

The Community Advantage Loans are SBA loans designed to help businesses in underserved markets get access to financing. These programs are available to borrowers who meet the SBA eligibility criteria but are not able to qualify for a standard SBA 7(a) loan because of low revenues, low collateral, or other reasons.

Under the Community Advantage Program, the SBA offers the same expedited application and approval process that comes with an SBA Express loan, but they’ll guarantee 85% of loans up to $250,000. This further reduces the risk to lenders and gives them more motivation to provide these loans over the SBA Express program.

2. CDC/SBA 504 Loans

The CDC/SBA 504 loan program provides SBA loans to small businesses looking to buy or build owner-occupied commercial real estate. The program pairs two lenders together to fund these projects: a bank or traditional lender and a CDC. The bank lends up to 50%, the CDC lends up to 40%, and the remaining 10% of the project’s costs come from the borrower, typically in the form of a cash down payment.

CDC/SBA 504 loans require that the business occupy at least 51% of the commercial space. While this is a great opportunity to rent out 49% of your new building to tenants, it’s only right for companies that actually expect to occupy the space themselves. It’s also only right for small U.S. businesses that meet the SBA’s basic eligibility requirements, such as being for-profit.

CDC/SBA 504 Loans at a Glance

*Last updated: August 2019

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CDC/SBA 504 Loan Interest Rates & Terms

The two loans involved in the 504 loan process will have different rates, terms, fees, and limits. Combined, these rates will make up your total SBA/CDC 504 loan rates. Generally, you’ll pay a total of 4% to 6% interest on your entire loan, with repayment terms as long as 25 years.

CDC Portion of the SBA 504 Loan

The CDC loan can cover up to 40% of the total project cost, and the SBA sets limits on the interest rates, terms, and fees given by the CDC. The loans must have terms of 10 or 20 years and the interest rates are generally less than 6%.

The rates as of August 1, 2019 are:

• Current 10-year CDC loans: Approximately 3.76%, fixed
• Current 20-year CDC loans: Approximately 4.08%, fixed

The interest rate is pegged to the five-year and 10-year U.S. Treasury rate with 10-year term loans, adding .38% to a five-year Treasury and 20-year term loans adding .48% to a 10-year Treasury. In addition, there are ongoing fees.

Bank & Nonbank Lender Portion of the SBA 504 Loan

The SBA does not set limits on the rates, terms, and fees for the traditional lenders, which leaves the details of the loan up for negotiation. In general, interest rates will be between 5% and 9.75% and will have a reset point. Typically, the loan will have a five- to 10-year term, but will be amortized over 20 to 25 years. You can check current CDC rates on our SBA loan rates page.

The combined maximum loan size for a project is $14 million. However, while there is a limit on how much can be loaned per project, borrowers can take out multiple SBA 504 loans at the same time for different projects. This raises the maximum amount to $20 million.

If you do not want to work with a CDC, then you should look at getting an SBA 7(a) commercial real estate loan. SmartBiz offers rates as low as 7% on loans up to $5 million. Get prequalified by filling out a short online form.

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CDC/SBA 504 Loan Requirements

To qualify for a CDC/SBA 504 loan, your business must meet these minimum requirements:

• Credit score: At least 680 (check yours for free)
• Down payment: At least 10% of the project cost

Additionally, you’ll be required to not have the needed funds available from other sources, not be engaged in the investment of rental real estate, and you’ll need to meet these other requirements:

• Business net worth: Have a tangible net worth less than $15 million
• Repayment ability: Be able to repay the loan on time from the projected operating cash flow of the business
• Building occupation: Building must be at least 51% owner-occupied

If you’re in the market for commercial real estate and will occupy at least 51% of the space, you may be a good candidate for an SBA 504 loan. We recommend working with Liberty SBF for SBA 504 loans. If you have a credit score above 680, have been in business three or more years, are profitable, and need more than $500,000, you should speak with Liberty SBF today.

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How to Apply for a CDC/SBA 504 Loan

The application process for SBA 504 loans is similar to SBA 7(a) loans in the amount of paperwork and time it takes to get funded. You’ll also have to provide additional paperwork on the property you’re funding. Read our in-depth guide to SBA 504 loans for more details.

3. SBA CAPLines Loan Program

The SBA CAPLines program has four SBA loan or line of credit products that are designed to provide up to $5 million to help small businesses meet their short-term and cyclical working capital needs. SBA CAPLines are best for businesses that need a revolving line of credit to make recurring payments or to prepare for unexpected expenses.

According to Terri Dennison, district director for the SBA Georgia district office:

“The SBA CAPLines Program addresses the short-term and cyclical working capital needs of a business. Companies requiring upfront expenditures for an extended period of time before receiving payment are ideal candidates. Firms with significant fluctuations in cash flow over the course of the business cycle can benefit as well.”

While technically SBA CAPLines can be issued as stand-alone products, typically these are only offered to borrowers in conjunction with a traditional SBA 7(a) loan or a CDC/SBA 504 loan. Well-qualified borrowers or those businesses that have potential to bring in a great deal of other business to a bank may be able to find a lender willing to issue a stand-alone CAPLines line of credit, but this is less common.

SBA CAPLines Program at a Glance

*Last updated: August 2019

SBA CAPLines Interest Rates

The SBA CAPLines program has interest rates that mirror the SBA 7(a) loan program (you can read our article for current SBA loan rates). Remember that with a line of credit, you only have to pay interest on what you borrow, and you’re not required to advance funds you don’t need. This makes it a great option for businesses with fluctuating cash flow needs.

The typical SBA CAPLines interest rates and fees are:

• Interest rates: 2.25% to 4.75% plus prime (typically 5% to– 10%)
• Origination fee: 0.5% to 3.5%
• Loan packaging fee: $2,000 to $4,000
• SBA guarantee fee: 2% to 3.5%
• Ongoing servicing fee: Up to 2%; may exceed 2% for Working Capital CAPLines

Ongoing servicing fees for an SBA line of credit through the CAPLines program will be higher than with an SBA 7(a) loan. This is because the lines of credit are extended based on short-term assets like invoices and contracts, which require continuous verification. For most of the CAPLines, the servicing fee is capped at 2% but can be higher for working capital lines.

SBA CAPLines Terms

SBA CAPLines typically feature the following terms:

• Loan amount: Up to $5 million
• Repayment terms: Up to 10 years; five years for Builder CAPLines
• Time to funding: At least 30 to 90 days

SBA CAPLines Minimum Requirements

Qualifications for the SBA CAPLines program are the same as they are for the SBA 7(a) program with a few additions. You will generally need to meet these requirements:

• Credit score: At least 680 (check your score for free)
• Other SBA loan requirements: No recent bankruptcies, foreclosures, or tax liens
• Collateral: Short-term collateral like invoices or project contracts
• Down payment: At least 10%
• Personal guarantee: At least 20% guaranteed by owners

Additional requirements will vary depending on the SBA line of credit for which you are applying. The SBA seasonal line of credit requires that your business be in operation for at least one year and that you demonstrate the seasonal nature of your business.

SBA CAPLines Loan Types

In summary, the SBA has four lines of credit that are meant to help businesses with their unique short-term and seasonal or cyclical working capital needs. The SBA CAPLines programs are for seasonal, contract, builder, and working capital purposes. Through an SBA line of credit, businesses can get up to $5 million in financing that may otherwise be difficult to access.

The four types of SBA CAPLines are:

1. SBA Seasonal Line of Credit Loan Program

A seasonal CAPLines is an SBA line of credit up to $5 million that can be used for seasonal increases in accounts receivable, inventory needs, or related increased labor costs. To qualify, in addition to the standard 7(a) requirements, your business needs to have been in operation for one or more years, and you need to demonstrate a pattern of seasonal activity.

2. SBA Contract Line of Credit Loan Program

A contract CAPLine is an SBA line of credit up to $5 million that can be used for the materials and labor associated with assignable contracts. To qualify, in addition to the standard 7(a) requirements, your business needs have demonstrated experience, profitability, and ability to perform the work and complete the designated contract, subcontract, or purchase order.

3. SBA Builders Line of Credit Loan Program

A builders CAPLine is an SBA line of credit up to $5 million for contractors and home builders who build or renovate residential or commercial buildings. To qualify, in addition to the standard 7(a) requirements, your business needs have demonstrated experience, profitability, and ability to perform the work and complete the project.

4. SBA Working Capital (Asset-based) Line of Credit Loan Program

A working Capital CAPLine is an SBA line of credit up to $5 million that allows small businesses to convert short-term assets like pending invoices into cash. To qualify, in addition to the standard 7(a) requirements, your business must generate accounts receivable or have inventory. The working capital CAPLine provides financing that might not otherwise be available.

How to Apply for an SBA CAPLine Line of Credit

The application process for an SBA line of credit through the CAPLine program is similar to that of an SBA 7(a) loan. Lenders like banks and credit unions that participate in the SBA 7(a) program are likely to also participate in the CAPLine program.

However, as we mentioned earlier, these lines of credit can be difficult to get as stand-alone products. Typically, you’ll need to bring a lot of other business to a lender to have them find underwriting an SBA line of credit to be worth it. Read our article on how to apply for an SBA loan to learn more about the application process.

4. SBA Export Loans

Export loans are SBA loans up to $5 million designed to help American small businesses expand their export activities, engage in international transactions, and enter new foreign markets. They’re best for businesses engaging in international business and growing their businesses in those areas.

SBA Export Loans at a Glance

*Last updated: August 2019

SBA Export Loan Interest Rates & Terms

The SBA Export loan interest rates and terms vary based on the type of export loan you choose. You can qualify for rates as low as 6% and terms as long as 25 years. The SBA Export loans have the largest range of terms and costs of any type of SBA loan.

Let’s take a look at typical SBA Export loan costs and terms:

BSA Export Loan Rates

SBA Export Working Capital loans do not have an SBA restriction on maximum interest rate. While this means the rate could be very high, in practice, the rates are usually in the range of 6% to 10%. The rates for SBA Export Express loans match the Express loan program (10% to 12%), and the rates for International Trade loans match the SBA 7(a) loan program (7.75% to 10.25%).

The typical SBA Export Working Capital loan rates and fees are:

• Interest rates: 6% to 10% (no SBA limit but monitored for reasonableness)
• Origination fee: 0.5% to 3.5%
• Loan packaging fee: $2,000 to $4,000
• SBA guarantee fee: 2% to 3.5%

SBA Export Loan Terms

SBA Export loans typically feature the following terms:

• Loan Amount: Up to $5 million ($500,000 for Export Express loans)
• Repayment terms: Up to three years for Export Working Capital loans, seven years for Export Express lines of credit, and the same as 7(a) loans (10 to 25 years) for International Trade loans and Export Express term loans
• Repayment cycle: Monthly
• Time to funding: At least 30 to 90 days

SBA Export Loan Requirements

Qualifications for an SBA Export loans for working capital closely resemble the requirements for an SBA 7(a) loan with a few variations based on which SBA Export loan you get.

In general, you’ll need:

• Credit score: At least 680 (check your score for free)
• Collateral: Short-term collateral like invoices or project contracts
• Personal guarantee: At least 20% guaranteed by owners
• Other SBA loan requirements: No recent bankruptcies, foreclosures, or tax liens

In addition, the Export Express loan requires businesses to be at least one year old and export products overseas. You don’t necessarily have to have a year’s history in exporting as long as your principals can show significant experience exporting.

The SBA International Trade loan program requires you to show that you can develop new foreign markets, expand existing foreign markets, or that your small business was affected adversely by imports and that the loan will increase your competitiveness. You can learn more by reading our article on import and export financing.

SBA Export Loan Types

In summary, the SBA has three export loan types that provide businesses with export working capital and international trade financing. With SBA financing, businesses can get funding that may not otherwise be available from a traditional loan or other sources. The three SBA export loan programs are Export Express, Export Working Capital, and International Trade.

1. SBA Export Express Loan

The SBA Export Express loan program offers streamlined funding up to $500,000 in working capital to promote small businesses with export activities. The simplified application process and the quick approval turnaround time make this loan appealing for export businesses needing smaller funding amounts.

The typical SBA Export Express loan rates and terms are:

• Loan amount: Up to $500,000
• Interest rates: 9.75% to 11.75%
• Terms: Up to seven years for a line of credit; same as 7(a) for term loans (10 to 25 years)

2. SBA Export Working Capital Loan

The SBA Export Working Capital loan program provides funding up to $5 million in working capital. These funds can be used to finance export transactions when the small business has a purchase order from a foreign customer. It can also be used for letters of credit and for working capital when the payment cycle is long.

The typical SBA Export Working Capital loan rates and terms are:

• Loan amount: Up to $5 million
• Interest rates: 6% to 10% (no SBA limit but monitored for reasonableness)
• Terms: Up to three years (12 months typical)

According to Dennison:

“This program helps small businesses meet short-term working capital needs in export transactions. They can apply for an Export Working Capital line of credit before finalizing the deal, better positioning them in negotiation of export payment terms.”

3. SBA International Trade Loan Program

The SBA International Trade loan program provides financing up to $5 million to small businesses that want to enter or expand into international markets. The eligibility and qualifications for the International Trade program generally mirror those of the SBA 7(a) loan program. If you have specific questions about the SBA Export Loan program, the SBA has international trade specialists available to answer your questions.

The typical SBA International Trade loan rates and terms are:

• Loan amount: Up to $5 million
• Interest rates: 7.50% to 10.00%, same as SBA 7(a)
• Terms: Up to 10 to 25 years, same as SBA 7(a)

How to Apply for an SBA Export Loan

You can apply for an SBA Export Loan with most SBA-approved 7(a) lenders. Finding a good lender is an important part of the application process. To make this process easier, we’ve provided a list of the top 100 SBA lenders, where we also reviewed 10 of the best SBA lenders. Also, check out our tips on how to apply for an SBA loan, which will help expedite the application process.

If exports make up of some of your business but are not a major portion, an SBA 7(a) loan will offer almost all of the same benefits. We recommend working with SmartBiz for SBA 7(a) loans because its speed and efficiency make what can be a grueling process very easy.

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5. SBA Microloan Program

The SBA Microloan program provides SBA loans to nonprofit intermediary lenders that, in turn, lend amounts under $50,000 to for-profit small businesses and nonprofit child care centers. The SBA does not guarantee any portion of the loans made under the SBA Microloan program. Microloans have terms up to six years, and the average size is about $13,000.

According to Dennison:

“The SBA Microloan program is ideal for home-based businesses, the self-employed, and others whose capital needs are smaller than what the conventional business loan calls for. Microlenders also provide the training and technical assistance crucial to longer-term business success.”

The nonprofit intermediaries can borrow up to $750,000 from the SBA in its first year and up to $1.25 million each year after that, but can have no more the $5 million borrowed at any one time. The Microloan program has averaged about $37 million in approvals per year during the past five years. This is a significant number of loans, given the average Microloan size is only $13,000.

SBA Microloan Program at a Glance

*Last updated: August 2019

SBA Microloan Interest Rates & Terms

The partner institutions set their own interest rates according to the creditworthiness of the borrower and the specifics of the startup or small business. However, on average, the interest rates range from 8% to 13%. You can borrow up to $50,000 with an SBA microloan, but the average loan size is about $13,000, and the maximum loan term is six years.

Let’s take a closer look at SBA Microloan costs and terms:

SBA Microloan Rates

SBA Microloan rates and fees are typically:

• Interest rates: 8% to 13%
• Fees: Packaging and closing fees vary by lender

SBA Microloan Loan Terms

SBA Microloan loan terms are typically:

• Loan amount: Up to $50,000
• Repayment terms: Up to six years
• Repayment cycle: Monthly
• Time to funding: At least 30 to 90 days

Note: The rates and terms of SBA Microloans are similar to those with most peer-to-peer loans. However, peer-to-peer loans can be approved in minutes without much paperwork, whereas SBA Microloans can take months to get approved and require extensive documentation.

SBA Microloan Requirements

SBA Microloan qualifications will vary from intermediary to intermediary. Unlike most of the SBA loan programs, the SBA leaves the qualifications up to the intermediary, which sets all eligibility requirements and makes all credit decisions.

The basic requirements to qualify for an SBA Microloan are:

• Credit score: At least 640 (check yours for free)
• Collateral: Some required, but the amount varies by lender.
• Personal guarantee: Required

The intermediary lender in the SBA microloan program has a little more flexibility in determining your creditworthiness than large lending institutions. However, they still need to feel extremely confident in your ability to repay the loan.

How to Apply for an SBA Microloan

To apply for an SBA microloan, you must work with an SBA-approved intermediary in your area. Here’s a list of SBA-approved intermediaries. While SBA Microloans are smaller in size, they typically take just as long as SBA 7(a) loans to obtain, which can mean several months.

For a faster alternative with similar rates and terms, those with a credit score above 660 can look into a peer-to-peer loan. You can get funded in a matter of days. Seeing what you’re prequalified for with Lending Club takes just a few minutes.

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6. SBA Disaster Loans

SBA Disaster loans are SBA loans used for recovery from a declared physical or economic disaster. Each Disaster loan can be used differently, and you can apply for multiple types of loans at the same time to meet your needs. These are best for businesses that have been negatively impacted by a disaster and those that can provide evidence of the negative impact.

SBA Disaster Loans at a Glance

*Last updated: August 2019

SBA Disaster Loan Interest Rates & Terms

The SBA Disaster loan rates and terms will vary based on the type of disaster loan. All of the SBA Disaster loans available offer rates as low as 4% and you can borrow up to $2 million. The highest interest rate you can be charged is 8%, and this is only if you are able to get credit from another source.

Let’s take a look at the rates and terms of an SBA Disaster loan:

SBA Disaster Loan Rates

The typical SBA Disaster loan rates are:

• Business Physical Disaster loan rates: 4% to 8%
• Economic Injury Disaster loan rates: 4%
• Military Reservist Economic Injury loan rates: 4%

SBA Disaster Loan Terms

The typical SBA Disaster loan terms are:

• Loan amount: Up to $2 million
• Repayment term: Up to 30 years
• Repayment cycle: Monthly

SBA Disaster Loan Requirements

The qualifications for each type of SBA Disaster loan are slightly different. One key difference shared by all of them is that you will be applying for a loan when your business may not be in great shape—certainly not physically and possibly not economically viable.

SBA Disaster loans typically require:

• Credit score: At least 660 (check your score for free)
• Other SBA loan requirements: Applicants can show an ability to repay the loan
• Collateral: Required for loans above $25,000 (above $50,000 for Military Reservist Economic Injury loans)

SBA Disaster Loan Types

In summary, there are three types of SBA Disaster loans that provide borrowers with a source of gap funding once other resources like insurance have been exhausted. Businesses of all sizes and most private nonprofit organizations meeting basic qualifications, such as good credit (credit score of at least 660) and an ability to repay, are eligible to apply for funding of up to $2 million.

The three types of SBA Disaster loans you can apply for are:

1. SBA Business Physical Disaster Loans

Long-term, low-rate loans designed to help businesses that suffered physical losses and damages due to a declared disaster replace or repair that property not covered by insurance up to $2 million. You may be eligible for an SBA Business Physical Disaster loan (BPDL) if your business has been physically damaged by a disaster that is in a declared disaster area.

2. SBA Economic Injury Disaster Loans

Short- to medium-term working capital loans to help businesses that have suffered significant economic injury meet normal operating expenses up to $2 million. You may be eligible for an SBA Economic Injury Disaster loan (EIDL) if your small business has suffered substantial economic injury as a result of a disaster and you are unable to meet your normal operational expenses.

3. SBA Military Reservists Economic Injury Loans

Short- to medium-term working capital loans to help businesses that lose an essential employee due to being called up for active military service meet normal operating expenses up to $2 million. You may qualify for an SBA Military Reservists Economic Injury loan (MREIDL) if an essential employee is called for active military duty and the loss results in an inability to meet normal operating expenses.

How to Apply for an SBA Disaster Loan

If disaster strikes and you need funds to cover gaps in insurance coverage or other assistance, you can apply for assistance directly from the SBA. Applying quickly enables you to begin recovering sooner. Check out our article on SBA Disaster loans for step-by-step instructions on the application and approval process.

Comparing Types of SBA Loans

Each SBA loan program has similarities in purpose, but they each cater to a different type of borrower. We used data provided by the SBA to analyze the number of loans and amount of funding provided by each program in fiscal year 2018, and also included a comparison to the number of loans originated in 2017.

The number of SBA loans provided by each program during the SBA’s 2018 fiscal year are:

Interestingly, the total number of loans given out in fiscal year 2018 is overwhelmingly dominated by SBA Disaster loans. This is likely due to Hurricane Harvey, Hurricane Maria, and other significant disasters that occurred in the fall of 2017 and into 2018. Normally, the most loans fall into the SBA Express and 7(a) loan categories, which are the second and third during fiscal year 2018.

The following chart shows more normal activity from fiscal year (FY) 2017:

The trend for FY 2018 in terms of the amount approved is also skewed from the norm. As shown below, general 7(a) loans represent the highest share. As we saw with the number of loans approved, SBA disaster loans come in second here as well. Again, this is most likely attributed to Hurricane Harvey and other significant disaster relief efforts that started in the fall of 2017.

The total dollar amount expended in each program during the 2018 fiscal year was:

To provide more insight into normal activity, we’ve also provided data for 2017. As you can see in the table below, the largest dollar amounts approved in a normal year are in SBA 7(a) and SBA 504 loans. SBA 504 loans beat out Express loans for the number two position in terms of the dollar amount approved because the typical loan size is much larger for an SBA 504 loan.

Comparatively, the total dollar amount expended in each program during the 2017 fiscal year was:

How SBA Loans Work: SBA Loan vs Bank Loan

Contrary to what many people think, other than under the Disaster loan program, SBA loans are not issued by the SBA. Banks, credit unions, community development organizations, microlending institutions, and others actually make the loans. The SBA makes a guarantee (promise) to cover a portion of your lender’s losses—50% to 85%—if you don’t pay as agreed.

The SBA guarantee reduces the risk for lenders, allowing lenders to make loans to businesses that they would otherwise not lend to. For example, businesses with insufficient down payments or collateral for conventional bank loans may be able to qualify for a loan that’s backed by an SBA guarantee. Similarly, borrowers usually receive loans with lower interest rates and longer repayment terms than they would with conventional commercial loans.

Navigating these requirements and the accompanying paperwork can be difficult, and is the main reason people think of SBA loans as slow and hard to get. Some of the best SBA lenders, like SmartBiz, have streamlined this process and drastically cut down paperwork and application times. In fact, SmartBiz routinely closes SBA loans in two to three weeks.

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6 SBA Loan Programs: Article Recap

The SBA offers six types of SBA loans that provide affordable financing for small business owners that might otherwise be difficult to obtain. While the purpose and terms of each of the types of SBA loans vary, they’re similar in that the SBA doesn’t issue the loans, except for Disaster loans. Instead, the SBA promises your lender to pay some of your loan if you fail to do so.

The most popular loan programs are the SBA 7(a), SBA 504, and SBA Express programs. SBA 7(a) loans provide borrowers with long-term capital up to $5 million, while SBA Express loans provide borrowers with a quick way to get up to $350,000 in financing. SBA 504 loans, on the other hand, are a way for businesses to get up to $20 million in financing for commercial real estate.

An overview of the six types of SBA loans discussed in this article are:

SBA 7(a) Loan Recap

SBA 7(a) loans, as large as $5 million, can be used for working capital, to refinance debt, or to buy a business, real estate, or equipment. The 7(a) program includes SBA Express loans and SBA Advantage loans. SBA 7(a) loans are good for prime borrowers (680 or higher credit score) who need access to long-term capital.

A recap of the SBA 7(a) loan financing rates, terms, and qualifications is:

• Rates: 7.50% to 10.00%
• Terms: Seven-year, 10-year, and 25-year terms are most common
• Qualifications: At least 680 credit score, 10% down payment, and some collateral

CDC/SBA 504 Loan Recap

The CDC/SBA 504 loan program combines a loan from a nonprofit CDC with a loan from a bank to create a long-term, low-interest rate loan for up to $20 million for the purchase of heavy equipment or owner-occupied commercial real estate. CDC/SBA 504 loans are good for prime borrowers (credit score of at least 680) who need access to long-term capital for real estate.

A recap of the CDC/SBA 504 loan financing rates, terms, and qualifications is:

• Rates: 3.76% to 4.08%
• Terms: 10 or 20 years
• Qualifications: At least 680 credit score, 10% down payment, and meet job creation and retention requirements

SBA CAPLines Loan Program Recap

SBA lines of credit are intended to meet short-term and seasonal working capital needs up to $5 million. There are four types of these lines of credit. They can be fixed or revolving lines and otherwise generally adhere to SBA 7(a) rules. They are good for borrowers who need access to working capital for seasonal needs or to meet the needs of a particular contract or project.

A recap of the SBA CAPLine financing rates, terms, and qualifications is:

• Rates: 7.50% to 10.00%
• Terms: Up to 10 years (five years for Builder CAPLines)
• Qualifications: At least 680 credit score, short-term collateral like invoices or assignable contracts

SBA Export Loans Recap

SBA Export loans are designed to help small businesses fund new exporting operations and offer cash flow solutions to small business so they can offer more flexible terms to their international customers. The SBA Export loan program provides financing up to $5 million—$500,000 under the Export Express program—that might otherwise be difficult to obtain.

A recap of the SBA Export Working Capital loan rates, terms, and qualifications is:

• Loan amount: Up to $5 million
• Interest rates: 6% to 10% (no SBA limit but monitored for reasonableness)
• Terms: Up to three years (12 months typical)
• Qualifications: At least 680 credit score and involved in exporting goods or services to foreign countries

A recap of the SBA Export Express loan rates, terms, and qualifications is:

• Loan amount: Up to $500,000
• Interest rates: 9.75% to 11.75%
• Terms: Up to seven years for a line of credit; same as 7(a) for term loans (10 to 25 years)
• Qualifications: At least 680 credit score and involved in exporting goods or services to foreign countries

A recap of the SBA International Trade loan rates, terms, and qualifications is:

• Loan amount: Up to $5 million
• Interest rates: 7.50% to 10.00%, same as SBA 7(a)
• Terms: Up to 10 to 25 years, same as SBA 7(a)
• Qualifications: At least 680 credit score and involved in exporting goods or services to foreign countries

SBA Microloan Program Recap

SBA Microloans are issued through nonprofit, community-based organizations in amounts up to $50,000. Microloans cannot be used to refinance debt or purchase real estate. They are great for borrowers of a very small size, including for-profit businesses and nonprofit child care centers.

A recap of the SBA Microloan program rates, terms, and qualifications is:

• Loan amount: Up to $50,000
• Interest rates: 8% to 13%
• Terms: Up to six years
• Qualifications: At least 640 credit score and some collateral

SBA Disaster Loans Recap

SBA Disaster loans are issued directly by the SBA and provide up to $2 million in disaster relief funding to businesses and nonprofits. The financing is available to businesses and private nonprofits located in declared disaster areas and who suffered damage to property or economic losses, as well as to businesses where a key employee is called to active military duty.

A recap of the SBA Disaster loan rates, terms, and qualifications is:

• Loan amount: Up to $2 million
• Interest rates: 4% to 8%
• Terms: Up to 30 years
• Qualifications: At least 660 credit score and ability to repay the loan

SBA Loans Frequently Asked Questions (FAQs)

This article has provided a lot of information about SBA loans. However, some questions are asked more frequently than others, which we’ve tried to address here. If we haven’t answered your question about SBA loans, feel free to share it with us in the Fit Small Business forum, and we’ll provide you with an answer.

Some of the most frequently asked questions about SBA loans are:

Do I qualify for an SBA loan?

Qualifying for an SBA loan typically requires you to have a credit score of 680 or higher, strong repayment ability (1.25 times or better debt service coverage ratio), and some collateral. Plus, you’ll need to meet basic SBA eligibility requirements, such as being a small for-profit business located in the United States.

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

The amount of time it takes to get approved for an SBA loan depends on the efficiency of your lender and how quickly you provide the required documentation. It typically takes 45 to 90 days or more. You can speed up the process by providing a complete application and choosing one of the best SBA lenders.

Are SBA loans hard to get?

You typically need a credit score of at least 680 and ability to repay (1.25 times or better DSCR) to get an SBA loan. If you meet these requirements, getting an SBA loan may be easier than traditional financing. However, applying for an SBA loan can be hard if you don’t have guidance.

Bottom Line

Hopefully, you now have enough information about each of the six primary types of SBA loans to help you decide which one is right for you. If you don’t think any of the SBA loans are right for you, or if you don’t qualify, there are plenty of other financing options available that might help you get the funds your business needs.

If you have a credit score above 680, have been in business for two or more years, are profitable, and need up to $350,000, we recommend applying with SmartBiz for a streamlined SBA 7(a) loan. It can prequalify you online in minutes and get you funded in as quickly as 30 days.

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