How to get an SBA loan in 2025

How to get an SBA loan in 2025

The U.S. Small Business Administration (SBA) is a government agency that provides free business counseling, SBA-guaranteed business loans, home and business disaster loans, and federal government contracting resources, LegalZoom explains.

What is an SBA loan?

There are two categories of SBA loans:

• SBA-guaranteed business loans. The SBA sets loan guidelines and guarantees business loans provided by approved lenders.
• SBA low-interest disaster assistance loans. The only time the SBA lends money directly to businesses, homeowners, or renters is when they are recovering from a declared disaster.

The SBA helps minimize lender risk and makes it easier for small business owners to get funding to start or grow their businesses. Small business owners can use the SBA’s Lender Match tool to get a tailored list of potential lenders that offer SBA-guaranteed loans.

SBA-backed loans typically have similar rates and fees to conventional loans, but some SBA-guaranteed loans may include the following perks:

• Counseling and education. Some loans include ongoing support to help business owners launch and operate their businesses.
• Lower down payments. New businesses or those with limited capital can benefit from loans with reduced down payment requirements.
• Flexible overhead requirements. Some loans offer flexibility regarding the amount a business needs to spend on overhead costs in order to qualify.
• No collateral requirements. Business owners often need to use an asset (such as a home, car, or inventory) to secure their loan, but some SBA-backed loans don’t have a collateral requirement.

Types of SBA loans

There are several types of SBA-backed loans, including the following:

• 7(a) loan program. This is the SBA’s main program for funding new and growing small businesses. The SBA provides loan guarantees to lenders that enable them to finance small businesses with specific needs, such as acquiring real estate, refinancing business debt, making leasehold improvements, or purchasing equipment or supplies. Small businesses can get a 7(a) loan of up to $5 million.
• 7(a) Working Capital Pilot (WCP) program. The SBA’s 7(a) WCP program offers monitored lines of credit for growing small businesses. Businesses that operate in manufacturing, wholesale, or professional services industries; need financing for domestic or export purposes; or need to satisfy large contracts can benefit from this program.
• 504 loan program. 504 loans are long-term, fixed-rate loans for major fixed assets that help create employment opportunities or stimulate business growth. 504 loans can be used for assets such as real estate, equipment, machinery, debt consolidation, and land or building improvements. Qualifying businesses can get 504 loans of up to $5.5 million through Certified Development Companies (CDCs). CDCs are SBA-certified and regulated nonprofit lenders that promote economic growth in their communities.
• Microloan program. Eligible small businesses and certain nonprofit child care facilities can get microloans of up to $50,000 from SBA-approved intermediary lenders. Microloans can be used for startup and expansion expenses, including working capital, inventory, supplies, and equipment.

Who’s eligible for an SBA loan?

Exact eligibility requirements for SBA-backed loans depend on the lender and loan type, but borrowers will typically need to disclose their business activities and location, meet the SBA’s size requirements, demonstrate good character and an ability to repay the loan and be unable to get a loan from nongovernment sources.

7(a) loan eligibility requirements

To be eligible for a 7(a) loan, businesses must:

• Operate as a for-profit business within the U.S.
• Be considered small under the SBA’s size standards. The SBA’s business size requirements typically depend on the industry and the number of employees or the amount of annual receipts a business has.
• Be an eligible business. Ineligible businesses include nonprofits, most financial and passive businesses, and life insurance companies, among others.
• Be unable to get credit on reasonable terms from nongovernment sources.
• Meet the lender’s credit standards and show that they have the ability to repay the loan.

504 loan eligibility requirements

Businesses that want a 504 loan must:

• Operate as a for-profit, eligible business in the U.S. or its territories.
• Meet net worth and net income requirements.
• Meet SBA business size requirements.
• Have management experience and a solid business plan.
• Be of good character.
• Be able to pay back the loan.

Microloan eligibility requirements

Microloan eligibility requirements depend on the lender but typically require collateral and the business owner’s personal guarantee.

The SBA application process in 5 steps

Here’s how to apply for an SBA-backed loan in five steps.

Step 1. Prepare necessary documentation

Before applying for a loan, you will need to gather the necessary information and documents.

The exact documents and information you’ll need depend on factors such as the size of the loan and how the lender processes it and can include the following:

• Business plan. A business plan explains what your business does, how it’s organized, and your strategy for success.
• Loan amount. You should know how much capital you need and what you will use the loan for.
• Your credit history. Lenders will look at your credit history to help determine interest rates.
• Collateral. You should compile a list of assets that can be used to secure the loan if collateral is required.
• Personal and business financial documents. You may need financial documents such as income tax returns, cash flow statements, and business bank account statements to apply for a loan.
• Financial projections. Lenders may require financial projections—how much income your business will bring in, what you will use funds for, and how you intend to repay the loan.
• Business licenses and permits. You may need business licenses, permits, and formation documents to prove your business’ legitimacy.

Step 2. Choose the appropriate loan program

The type of loan program you need to fund your business depends on your individual needs.

For instance, a business that needs a general-purpose loan can use the SBA’s Lender Match program to find a 7(a) loan lender, while a business that needs to purchase a major fixed asset such as real estate or commercial equipment might apply for a 504 loan with a CDC. Business owners who need small loans of up to $50,000 to start or develop their business can apply for a microloan through an intermediary.

Step 3. Find an SBA-approved lender

If you want to get a 7(a) loan or a 7(a) WCP line of credit, you can use the SBA’s Lender Match tool to find a lender.

Simply answer a few questions about your business and create an SBA account and you will get a list of lenders interested in your loan within two business days. You can speak to each lender to compare their rates, terms, and fees.

If you want to apply for a 504 loan, you will need to contact a CDC in your area. You can search the SBA’s list of CDCs to find a 504 lender.

If you need a microloan of up to $50,000, you must find a participating authorized intermediary lender in your area. Search the SBA’s list of microlenders to find an intermediary.

Step 4. Submit the loan application

The exact loan application process depends on the type of loan and lender. In general, you will want to verify the accuracy of all required information and submit any necessary documents along with the application.

Borrowers can increase the likelihood of loan approval by maintaining a strong personal and business credit history, developing a detailed business plan, and providing evidence of their ability to repay the loan.

Step 5. Await approval

The length of time it takes to get an SBA-backed loan depends on the loan type and individual lenders’ average processing times.

For instance, these are the SBA turnaround times for common 7(a) loan types:

• Standard 7(a)—five to 10 business days
• 7(a) Small—two to 10 business days
• 7(a) International Trade—five to 10 business days

SBA loan pros and cons

Pros

• Lower down payments
• Longer repayment terms (for 7[a] and 504 loans)
• Comparable interest rates and fees to conventional loans
• Access to funding for businesses that don’t qualify for loans from nongovernment sources

Cons

• Strict eligibility requirements
• May need collateral or personal guarantee
• Restrictions on how funds are used
• Some loans have prepayment penalties

SBA loan alternatives

If you don’t get approved for an SBA-guaranteed loan, you still have options.

SBA-backed business loan alternatives can include the following:

• Traditional bank loans
• Business lines of credit
• Online business loans
• Venture capital and angel investors
• Crowdfunding

Your business must be officially registered and operate legally in the U.S. to get an SBA loan, and other lenders may have similar requirements.

FAQs

How much can I borrow with an SBA loan?
You can borrow between $500 and $5.5 million with an SBA-backed loan.

What credit score do I need for an SBA loan?
Credit score requirements for SBA-guaranteed loans vary depending on loan type.

For example, the SBA uses FICO Small Business Scoring Service (SBSS) to prescreen 7(a) Small loan applicants. The SBSS score ranges from 0 to 300 and is calculated by looking at a borrower’s personal and business finances, including on-time payment history, types of loans, number of employees, cash flow, and how long a business has been operating. Businesses that want to get a 7(a) Small loan of $500,000 or less must have a minimum SBSS score of 155.

How long does it take to get an SBA loan?
SBA-guaranteed loan application processing times depend on the loan type and lender.

For example, the turnaround time for 7(a) small loans is two to 10 business days, while the turnaround time for standard 7(a) loans is five to 10 business days.

What is the interest rate on an SBA loan?
The interest rate on SBA-backed loans depends on the loan program and type.

The SBA sets maximum interest rates for certain 7(a) loan types, and lenders and borrowers can often negotiate interest rate terms.

The interest rate for active 504 loans is tied to an increment above the current market rate of U.S. Treasury issues and totals approximately 3% of the debt. The interest rate can be refinanced with the loan.

The interest rates for microloans depend on the intermediary lender but typically range between 8%-13%.

Do I need collateral for an SBA loan?
Many SBA-guaranteed loans require collateral, but there are some loan options that don’t.

For instance, the SBA does not require collateral for most 7(a) small loans of $50,000 or less.

Can startups get SBA loans?
Yes, startups can get SBA-guaranteed loans.

What are the repayment terms for SBA loans?
Like the guaranty percentage and loan amount, the repayment terms for SBA-backed loans depend on the loan type.

You can find general loan terms for 7(a) loans by finding your loan type on the SBA’s Types of 7(a) loans page. To find terms for 504 loans or microloans, you can contact your CDC or SBA-approved intermediary.

This story was produced by LegalZoom and reviewed and distributed by Stacker.