The Small Business Administration (SBA) guarantees small business loans issued by approved lenders. SBA loans are difficult to qualify for but carry low interest rates up to 10% and repayment 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 recommend SBA loan provider is SmartBiz. They offer SBA 7(a) 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.
6 SBA Loan Programs
| SBA 7(a) Loans | (Most popular overall) Small businesses that need working capital up to $5 million |
| SBA CDC/504 Loans | Purchasing owner-occupied commercial real estate |
| SBA CAPLines | Companies that need a line of credit that can be used again |
| SBA Export Loans | Export businesses that need to finance their export activity |
| SBA Microloans | Businesses that need a smaller amount of working capital up to $50,000 |
| SBA Disaster Loans | Companies that have been impacted by a declared natural disaster |
Here are the six types of SBA loans in detail:
1. SBA 7(a) Loans
SBA 7(a) loans are the most common type of SBA loan. 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
| Interest Rates | 7.50 - 10.00% |
| 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 (check yours for free) 10-20% Down payment Some collateral (loan doesn’t have to be fully collateralized) |
| Use of Loan Proceeds | Working capital Equipment purchases Refinance debt Buy a business or franchise Buy commercial real estate Leasehold improvements |
*Last Updated: October 2018
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% – 4.75% + prime rate, typically 5% to 10%, but you can check the current SBA loan rates)
- Origination fee: 0.5 – 3.5%
- Loan packaging fee: $2,000 – $4,000
- SBA guarantee fee: 2% – 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 – 25 years for commercial real estate
- Repayment cycle: Monthly
- Time to funding: 30 – 90+ days
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 as well as 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: 680+ (check your score for free)
- Other 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: 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 need to also to provide financial projections for your business’s performance over the next 3 to 5 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 — 700+ credit score, high net worth and real estate with significant equity — to get approved for an SBA loan 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 creative ways to meet the down payment requirements. The process starts with a free startup loan consultation.
If you’ve been in business for 2 or more years, have a 680-plus credit score 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 5 minutes and get funded in as quickly as 30 days.
How to Apply for an SBA 7(a) Loan
Applying for an SBA loan 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 ever 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 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. Check out our review of the 100 best SBA lenders, where we provide the top 100 and review the 10 best.
If you’re ready to start your application, 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.
SBA Express Loan Program
One drawback of the standard SBA 7(a) loan is that the application process can take months. In order 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 percent 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 percent of loans up to $250,000. This further reduces the risk to lenders and gives them more motivation to lend 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 percent, and the CDC lends up to 40 percent while the remaining 10 percent 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 percent of the commercial space. While this is a great opportunity to rent out 49 percent 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
| Interest Rates | 5.04 - 5.25% |
| Loan Amounts | Up to $14 - 20 million |
| Repayment Terms | 10 or 20 years |
| Minimum Requirements | 680+ credit score (check yours for free) 10% down payment Meet job creation or public policy goals Real estate must be at least 51% owner-occupied |
| Use of Loan Proceeds | Owner-occupied commercial real estate purchase, construction or renovation Purchase of other fixed assets |
*Last Updated: October 2018
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 percent to 6 percent 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 percent 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 generally look like this:
- Current 10-year CDC loans: ~5.04%, fixed
- Current 20-year CDC loans: ~5.25%, fixed
The interest rate is pegged to 5-year and 10-year U.S. Treasury rate with 10-year term loans, adding .38 percent to a 5-year treasury and 20-year term loans adding .48 percent 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 percent and 9.75 percent and will have a reset point. Typically, the loan will have a 5- 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. Northeast Bank offers rates as low as 5.5 percent on loans up to $5 million. Get prequalified by filling out a short online form.
CDC/SBA 504 Loan Requirements
To qualify for a CDC/SBA 504 loan, your business must meet these minimum requirements:
- Credit score: 680+ (check yours for free)
- Down payment: 10%+ of the project cost
Additionally, you’ll be required not to 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:
- Have a tangible net worth less than $15 million
- Be able to repay the loan on time from the projected operating cash flow of the business
- Building must be 51%+ owner-occupied
If you’re in the market for commercial real estate and will occupy at least 51 percent 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 3 or more years, are profitable and need more than $500,000, you should speak with Liberty SBF today.
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
| Interest Rates | 7.50 - 10.00% |
| Loan Amounts | Up to $5 million |
| Repayment Terms | Up to 10 years for Seasonal, Working Capital & Contract CAPLines Up to 5 years for Builders CAPLines |
| Minimum Requirements | Same as with SBA 7(a) loans plus:
|
| 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 |
*Last Updated: October 2018
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% – 4.75% + prime (typically 5 – 10%)
- Origination fee: 0.5% – 3.5%
- Loan packaging fee: $2,000 – $4,000
- SBA guarantee fee: 2% – 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 CAPLine 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 contract, which require continuous verification. For most of the CAPLines, the servicing fee is capped at 2 percent 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; 5 years for Builder CAPLines
- Time to funding: 30 – 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: 680+ (check your score for free)
- Other requirements: No recent bankruptcies, foreclosures or tax liens
- Collateral: Short-term collateral like invoices or project contracts
- Down payment: 10%+
- Personal guarantee: 20%+ guaranteed by owners
Additional requirements will vary depending on the SBA line of credit that you’re applying for.
The SBA seasonal line of credit requires that your business must 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 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 and/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 standalone 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
| Interest Rates | SBA Export Working Capital: Typically 6 - 10% (no SBA limit but monitored for reasonableness) SBA Export Express: 9.75 - 11.75% International Trade: 7.50 - 10.00% |
| Loan Amounts | SBA Export Working Capital: Up to $5 million SBA Export Express: Up to $500,000 International Trade: Up to $5 million |
| Repayment Terms | SBA Export Working Capital: Up to 3 years (typically 12 months) SBA Export Express: Up to 7 years for a line of credit; same as SBA a for a term loan (10 - 25 years) International Trade: Up to 10 - 25 years (same as SBA 7(a)) |
| Minimum Requirements | 680+ Credit score (check yours for free) Business must be involved in exporting goods or services to foreign countries For Export Express, the business must be at least 1 year old |
| Use of Loan Proceeds | To develop or expand small business exporting and international trade |
*Last Updated: October 2018
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 percent 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:
SBA 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 percent. The rates for SBA Export Express loans match the Express loan program (9.75 to 11.75 percent), and the rates for International Trade loans match the SBA 7(a) loan program (7.50 to 10.00 percent).
The typical SBA Export Working Capital loan rates and fees are:
- Interest rates: 6 – 10% (no SBA limit but monitored for reasonableness)
- Origination fee: 0.5 – 3.5%
- Loan packaging fee: $2,000 – $4,000
- SBA guarantee fee: 2 – 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 3 years for Export Working Capital loans, 7 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: 30 – 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: 680+ (check your score for free)
- Collateral: Short-term collateral like invoices or project contracts
- Personal guarantee: 20%+ guaranteed by owners
- Other requirements: No recent bankruptcies, foreclosures or tax liens
In addition, the Export Express loan requires businesses be at least one year old and export products overseas. You don’t necessarily have to have a year’s history in exporting so long as your principles 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 & 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.
The three types of SBA Export loans are:
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 -11.75%
- Terms: Up to 7 years for a line of credit; same as 7(a) for term loans (10 – 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 – 10% (no SBA limit but monitored for reasonableness)
- Terms: Up to 3 years (12 months typical)
According to Dennison:
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.
The typical SBA International Trade loan rates and terms are:
- Loan amount: Up to $5 million
- Interest rates: 7.50 – 10.00%, same as SBA 7(a)
- Terms: Up to 10 – 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.
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 6 years, and the average size is about $13,000.
According to Dennison:
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 5 years. This is a significant number of loans, given the average Microloan size is only $13,000.
SBA Microloan Program at a Glance
| Interest Rates | 8 - 13% |
| Loan Amounts | Up to $50,000 |
| Repayment Terms | Up to 6 years |
| Minimum Requirements | 640+ Credit score (check yours for free) Typically need to have some collateral Nonprofit child care 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 |
*Last Updated: October 2018
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 6 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 – 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 6 years
- Repayment cycle: Monthly
- Time to funding: 30 – 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 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: 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.
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
| Interest Rates | 4 - 8% |
| Loan Amounts | Up to $2 million |
| Repayment Terms | Up to 30 years |
| Minimum Requirements | 660+ Credit score (check yours for free) Your business must have suffered a 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 |
*Last Updated: October 2018
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 percent and you can borrow up to $2 million. The highest interest rate you can be charged is 8 percent, 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 – 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: 660+ (check your score for free)
- Other 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)
Types of SBA Disaster Loans
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 — 660+ credit score — 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 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. Let’s take a look at the comparison of the major SBA loan programs based on how many loans were given during a portion the SBA’s 2018 fiscal year:
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 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.
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.
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 percent — 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 2 to 3 weeks.
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 don’t.
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-plus 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 – 10.00%
- Terms: 7-year, 10-year and 25-year terms are most common
- Qualifications: 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 — 680+ credit score — 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: 5.04 – 5.25%
- Terms: 10 or 20 years
- Qualifications: 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 – 10.00%
- Terms: Up to 10 years (5 years for Builder CAPLines)
- Qualifications: 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 – 10% (no SBA limit but monitored for reasonableness)
- Terms: Up to 3 years (12 months typical)
- Qualifications: 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 – 11.75%
- Terms: Up to 7 years for a line of credit; same as 7(a) for term loans (10 – 25 years)
- Qualifications: 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 – 10.00%, same as SBA 7(a)
- Terms: Up to 10 – 25 years, same as SBA 7(a)
- Qualifications: 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 – 13%
- Terms: Up to 6 years
- Qualifications: 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 – 8%
- Terms: Up to 30 years
- Qualifications: 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 FitSmallBusiness 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 good personal credit score of (680 or higher, strong ability to repay — 1.25 times or better debt service coverage ratio (DSCR) — 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 and having owners with good character.
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 to have a 680 or higher personal credit score and ability to repay — 1.25 times or better DSCR — to get an SBA loan. If you meet these requirements, it may be easier to get an SBA loan than traditional financing. However, applying for an SBA loan can be hard if you don’t have guidance.
The 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.
david
i had a spa loan long time ago that went to default and i lost the business
Can i ever get sea loan again
Hi David,
The SBA typically can’t provide assistance to businesses or owners with a prior government loss. If the SBA took a loss on your loan (e.g., your debt was settled for less than the full amount), then you fall into this category. On a case-by-case basis, the SBA can waive this exclusion for good cause. This is something you should discuss with your SBA lender. If you’re still looking for a lender, a great place to start is with our list of the best SBA lenders. Best wishes!
Tim
Hi Jeff, only thing I don’t get is the ‘build-up’ of the loan and the part guaranteed by the SBA. In the case of the 504, the SBA provides up to 40%, and the bank up to 50%. Is only the 40% guaranteed by the SBA? And then; the entire amount of the 40% or 75% (usual SB guarantee rate) of that 40%? Does the SBA supply money in the case of other loan types as well, or does it just guarantee 85-75%? I’m writing an essay on government guarantees, hence the specific questions 😉
Hi Tim!
Great questions! Sorry for the delay in responding. An SBA 504 loan is really two loans, one from a lender and the other from a CDC. The SBA’s guarantee is on the full CDC loan, which can represent up to 40% of the total financing package. This is different from other types of SBA financing, where there is one loan and the SBA guarantees a portion (up to 85%). Good luck with your continued research!
Stewart
You state here the maximum loan size for a CDC 504 loan is $14,000,000. That seems to be different that what the SBA.gov site says.
Hi Stewart.
Thanks for pointing this out in an effort to help. However, we state in the opening section that a 504 loan goes up to $20 million, which is what we believe they typically max out at with most lenders. However, in order to get to these loan sizes you’ll likely have to have some experience with the lender. In the 504 section below that we put $14 million in there because this is the max loan for brand new borrowers from the recommended provider we point you to. If instead you’re referring to the $5 million debenture you’re forgetting about the CDC portion of the loan, and the portion of the loan a lender is willing to lend above and beyond the SBA debenture. There are no project maximums for SBA 504 loans.
Best,
Jeff
Ishan Jetley
Great explanation of the different SBA loan types. What loan type would you recommend for a construction company?
Hi Ishan!
The type of loan you’ll require through the SBA loan program is going to greatly depend on what you plan on using the funds for and what collateral you potentially have to put down. The majority of businesses looking for working capital, or for funds to buy a business, are going to find the SBA 7a loan as their best choice. Knowing nothing else other than the fact you’re a construction company, I would say you should look into the 7a loan. However, knowing more about your business and the use of funds will help you get a more defined answer. Good luck!
Best,
Jeff
Marcus Mavakala
Very good job explaining the different SBA LOAN PROGRAMS. As a SBA LOAN BROKER for the last 13 years I have to agree this is the most complete explanation on SBA loans I’ve seen so far.
Hi Marcus,
I’m glad you liked the article. Thanks for reaching out.
Best,
Ian