SBA Loans: Types, Rates & Requirements

The Small Business Administration (SBA) guarantees business loans issued by approved lenders. Though difficult to qualify for, SBA loans carry relatively low interest rates with terms up to 25 years.

The six types of SBA loans are:

SBA 7(a) Loans: Working capital up to $5 million
SBA CDC/504 Loans: For purchasing owner-occupied commercial real estate
SBA CAPLines: A line of credit that can be used again
SBA Export Loans: Financing for exporters to bolster their export activity
SBA Microloans: Working capital loans of up to $50,000
SBA Disaster Loans: Loans for businesses that have been impacted by a declared natural or economic disaster.

1. SBA 7(a) Loans

Interest Rates	2.25% to 4.75% plus prime rate (5.5% to 8% as of January 2022)
Loan Amounts	Up to $5 million
Repayment Terms	Up to 10 years for working capital loans Up to 25 years for commercial real estate loans
Minimum Requirements	680 credit score 10% to 20% down payment (may be higher for startups) Some collateral (loan doesn’t have to be fully collateralized) Personal guarantee
Use of Loan Proceeds	Working capital Equipment purchases Refinance debt Buy a business or franchise Buy commercial real estate Leasehold improvements

Interest Rates	2.25% to 4.75% plus prime rate You can check the current SBA loan rates
Origination	0.5% to 3.5%
Loan Packaging Fee	$2,000 to $4,000
SBA Guarantee Fee	Up to 3.75%
Repayment Terms	Up to 10 years for working capital Up to 25 years for commercial real estate

Minimum Credit Score	680
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
Other SBA Requirements	No recent bankruptcies, foreclosures, tax liens, or prior default on government loans
Down Payment	At least 10% down payment if you are using the loan to purchase a business, commercial property, or equipment

SBA 7(a) loans are the most common type of SBA financing. These loans are offered in amounts up to $5 million and can be used for working capital, refinancing debt, or purchasing a business, real estate, or equipment. Two popular loans, the SBA Express Loan and SBA Advantage Loan, are also part of the 7(a) loan program. SBA 7(a) loans are popular due to their long repayment terms and low interest rates, which make them one of the most affordable working capital solutions available to small businesses.

While the SBA doesn’t set a minimum loan amount, most lenders won’t fund loans that are less than $30,000. If you’re curious about how affordable an SBA 7(a) loan would be for your business, our SBA loan calculator can estimate what your monthly payments would be, based on the loan amount and repayment term you’re targeting.

Startup businesses will need to meet the above requirements for an SBA 7(a) loan and also have:

Demonstrated experience: Startups need to show the lender they have sufficient industry or business management experience and a strong business plan.
Larger down payments: Most SBA lenders will require an equity injection or down payment of at least 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’s very difficult for anyone other than highly qualified borrowers―credit score of at least 700, higher net worth, and real estate with sufficient equity―to get approved for SBA financing as a startup.

Guidant Financial can help startups put together their SBA loan applications and find the lenders most likely to work with them. Additionally, if you have retirement savings in a 401(k) or IRA, Guidant can assist you with a Rollover for Business Startup (ROBS) that can be used to meet the down payment requirements. The process starts with a free startup loan consultation.

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How To Apply for an SBA 7(a) Loan

Applying for an SBA loan can be a complicated and time-consuming process. It’s critical to take time before applying to ensure you qualify for an SBA loan and that the lender you use is well-versed in working with the SBA. Generally, an SBA loan can take 90 days or more before possible approval and subsequent funding; however, SBA preferred lenders may be able to approve and fund loans in less time.

SBA Express Loan Program

The SBA offers an expedited processing service for smaller loans called the SBA Express Loan. The SBA Express Loan generally follows the same guidelines as the standard SBA 7(a) loan, but the maximum loan amount is limited to $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 tend to be higher than other 7(a) loans.

SmartBiz can help you get the funds you need in as quickly as 30 days, faster than many lenders. You can prequalify through a simple online application that takes only a few minutes to complete.

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SBA 7(a) Community Advantage Loans

SBA Community Advantage Loans are designed to help businesses in underserved communities gain access to financing. These programs are available to borrowers who meet the SBA eligibility criteria but cannot qualify for standard SBA 7(a) loans 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

Interest Rates	2.7% to 3.1% (CDC portion) 4% to 9.75% (Bank portion)
Loan Amounts	Up to $5 million
Repayment Terms	10, 20, or 25 years
Use of Loan Proceeds	Owner-occupied commercial real estate purchase, construction, or renovation Purchase of other fixed assets

CDC Loan (40%) Interest Rate	10-year: Approximately 2.7%, fixed 20-year: Approximately 2.9%, fixed 25-year: Approximately 3.1%, fixed
Bank & Nonbank Loan (50%) Interest Rate	Varies, generally between 4% and 9.75% Rate may be reset by bank after 5 or 10 years
SBA Guarantee Fee	0.5% as of January 2022
CDC Fees	Typically 1.5% to 2% for processing and funding
Repayment Terms	10, 20, or 25 years

Minimum Credit Score	680
Down Payment	At least 10% of the project cost
Business Net Worth	Less than $15 million
Building Occupation	At least 51% owner-occupied real-estate to be used as collateral
Other Requirements	No recent bankruptcies, foreclosures, or tax liens Business owners not engaged in investment real estate

The CDC/SBA 504 loan program provides SBA loans to small businesses looking to purchase or build owner-occupied commercial real estate. The program pairs two lenders together to fund these projects: a bank or traditional lender and a community development corporation (CDC). The bank lends up to 50%, the CDC lends up to 40%, and the remainder 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, this type of SBA loan is best suited for companies that expect to occupy the space themselves.

How To Apply for a CDC/SBA 504 Loan

The application process for SBA 504 loans is similar to that of SBA 7(a) loans with regard to the amount of paperwork and time it takes to get funded. Additionally, you’ll also have to provide paperwork on the property you’re funding.

3. SBA CAPLines Loan Program

Interest Rates	5.50% to 8.00% (Prime plus 2.25% to 4.75%)
Loan Amounts	Up to $5 million
Repayment Terms	Up to 10 years for seasonal, working capital & contract CAPLines Up to 5 years for builder CAPLines
Use of Loan Proceeds	Support short-term or seasonal working capital needs Fulfill contracts or purchase orders Perform construction or significant renovations on an eligible project

Seasonal Line of Credit	This can be used for seasonal increases in accounts receivable, inventory needs, or related increased labor costs. To qualify, your business needs to have been in operation for at least one year and have a demonstrated pattern of seasonal activity.
Contract Line of Credit	This can be used for the materials and labor associated with assignable contracts. To qualify, your business needs to have demonstrated experience, profitability, and ability to perform the work and complete any designated contracts, subcontracts, or purchase orders.
Builders Line of Credit	This type is for contractors and home builders who build or renovate residential or commercial buildings. To qualify, your business needs to have demonstrated experience, profitability, and ability to perform the work and complete the project.
Working Capital (Asset-Based) Line of Credit	A working capital line of credit can be used to convert short-term assets like pending invoices into cash. To qualify, your business must generate accounts receivable or have inventory.

Interest Rates	5.50% to 8.00% (Prime plus 2.25% to 4.75%)
Origination Fee	0.5% to 3.5%
Loan Packaging Fee	$2,000 to $4,000
SBA Guarantee Fee	Up to 3.75%
Ongoing Servicing Fee	Up to 2%—may exceed 2% for Working Capital CAPLines
Loan Amount	Up to $5 million
Repayment Terms	Up to 10 years—5 years for Builder CAPLines

Minimum Credit Score	680
SBA Loan Requirements	No recent bankruptcies, foreclosures, or tax liens
CAPLine Requirements	Seasonal: At least one year of operations and a demonstrated pattern of seasonal selling activity Contract: Demonstrated experience, profitability, and ability to perform the work and complete the contract Builder: Must be contractors focused on construction or home building with demonstrated experience, profitability, and ability toperform the work and complete the project Working capital: Must generate accounts receivable and/or have inventory
Collateral	Short-term collateral like invoices or project contracts
Down Payment	At least 10%
Personal Guarantee	Required for anyone with 20% or more ownership in business
Loan Amount	Up to $5 million
Repayment Terms	Up to 10 years—five years for Builder CAPLines

The SBA CAPLines program offers 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.

“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.” ― Terri Dennison, Georgia District Director, SBA

The SBA CAPLines program has interest rates that mirror the SBA loan rates for the 7(a) program. 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.

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 CAPLines, the servicing fee is capped at 2%, though it can be higher for working capital CAPLines.

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. Traditional lenders that participate in the SBA 7(a) program, such as banks and credit unions, are likely to also participate in the CAPLines program.

Well-qualified borrowers or those businesses that have the 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 SBA CAPLines line of credit. However, CAPLines are typically offered to borrowers in conjunction with a traditional SBA 7(a) loan or a CDC/SBA 504 loan.

4. SBA Export Loans

Interest Rates	SBA Export Express: 7.75% to 9.75% SBA Export Working Capital: Typically 6% to 10% (no SBA limit but monitored for reasonableness) International Trade: 7.50% to 10.00%
Loan Amounts	SBA Export Express: Up to $500,000 SBA Export Working Capital: Up to $5 million International Trade: Up to $5 million
Repayment Terms	SBA Export Express: Up to 7 years for a line of credit—up to 10 to 25 years for a term loan SBA Export Working Capital: Up to 3 years (typically 12 months) International Trade: Up to 10 to 25 years (same as SBA 7(a))
Minimum Requirements	680 credit score Business must be involved in exporting goods or services to foreign countries For Export Express, the business must be at least one year old
Use of Loan Proceeds	To develop or expand small business exporting and international trade

Description	Offers working capital funding 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.
Loan Amounts	Up to $500,000
Interest Rate	7.75% to 9.75%
Terms	Up to 7 years for lines of credit Up to 10 or 25 years for term loans

Description	These funds can be used to finance export transactions when the small business has a purchase order from a foreign customer. The SBA’s Export Working Capital loans can also be used for letters of credit and for working capital to supplement long payment cycles from customers.
Loan Amounts	Up to $5 million
Interest Rate	6% to 10% (no SBA limit but monitored for reasonableness)
Terms	Up to 3 years (12 months is typical)

Description	Provides export financing to small businesses that are able to develop new or expand existing foreign markets as well as businesses that have been adversely affected by imports.
Loan Amounts	Up to $5 million
Interest Rate	7.5% to 10%
Terms	Up to 25 years

SBA Export Loans provide up to $5 million in funding to help American small businesses expand their export activities, engage in international transactions, and enter new foreign markets. These loans are aimed at businesses that are engaging in international business and growing their businesses in those areas.

The SBA offers three types of export loans that provide businesses with export working capital and international trade financing. With SBA export 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.

The eligibility and qualifications 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 assist.

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 SBA lenders.

5. SBA Microloan Program

The SBA Microloan program provides SBA loans to nonprofit intermediary lenders that subsequently lend amounts under $50,000 to for-profit small businesses and nonprofit childcare centers. The SBA doesn’t guarantee any portion of the loans made under the SBA Microloan program. Microloans have terms up to six years, and the average loan amount is roughly $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.”

Nonprofit intermediaries can borrow up to $750,000 from the SBA in their first year and up to $1.25 million each year after that, with no more than $5 million borrowed at any one time. The SBA Microloan program has averaged about $37 million in approvals annually during the past five years.

SBA Microloan Rates, Terms, and Qualifications

Interest Rates	6% to 9%
Loan Amounts	Up to $50,000
Repayment Terms	Up to six years
Minimum Requirements	640 credit score but may vary based on lender Nonprofit childcare centers are eligible in some cases
Use of Loan Proceeds	To start or expand a small business Can’t be used to refinance debt or buy real estate
Collateral	Some will be required; amount varies by lender
Personal Guarantee	Required

Nonprofit intermediaries set their own interest rates according to the creditworthiness of the borrower and the specifics of the startup or small business. Nonprofit intermediary lenders in the SBA Microloan program have more flexibility in determining your creditworthiness than traditional and larger lenders. However, the nonprofit lender will still need to feel extremely confident in your ability to repay the loan.

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

How To Apply for an SBA Microloan

To apply for an SBA Microloan, you must work with an SBA-approved intermediary in your area. While SBA Microloans are smaller in size, approval and funding can take 90 days or longer.

6. SBA Disaster Loans

SBA disaster loans are 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 negative impact.

Businesses of all sizes and most private nonprofit organizations meeting basic qualifications, such as acceptable credit and an ability to repay, are eligible to apply for disaster loans.

SBA Disaster Loan Types

SBA Economic Injury Disaster Loans	Working capital loans to help eligible businesses that have suffered significant economic injury as a result of a disaster and are unable to meet their normal operational expenses
SBA Military Reservists Economic Injury Loans	Working capital loans to help businesses that lose an essential employee due to being called up for active military service and the loss of the employee results in an inability to meet normal operating expenses
SBA Business Physical Disaster Loans	Long-term, low-rate loans designed to help eligible businesses, which suffered physical losses and damages due to a declared disaster, to replace or repair that property not covered by insurance

SBA Disaster Loan Rates, Terms, and Qualifications

Interest Rates	2.75% to 3.75% for Economic Injury Disaster Loans 4% for Military Reservists Economic Injury Loans 4% to 8% for Business Physical Disaster Loans
Loan Amounts	Up to $2 million
Repayment Terms	Up to 30 years
Minimum Requirements	At least a 575 credit score for loans of up to $500,000—625 credit score above $500,000 Your business must have suffered physical or economic damage from a disaster Your business must be located in an SBA declared disaster area For Military Reservist loans, an essential employee must have been called to active duty
Use of Loan Proceeds	To repair or replace damaged property Working capital Operating expenses
Collateral	Required: More than $25,000 for Economic Injury Disaster and Business Physical Disaster Loans Required: More than $50,000 for Military Reservist Economic Injury Loans

How To Apply for an SBA Disaster Loan

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

How SBA Loans Work

Other than the Disaster Loan program, SBA loans are actually not issued by the SBA. Banks, credit unions, community development corporations, micro-lending institutions, and other lenders provide these loans. The SBA makes a guarantee or promise to cover a portion of the lender’s losses if a borrower defaults on their loan. This guarantee ranges from 50% to 85%.

The SBA guarantee reduces the risk for lenders. This allows lenders to make loans to businesses 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. In some cases, borrowers receive loans with lower interest rates and longer repayment terms than they would with conventional commercial loans.

Bottom Line

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