How To Apply For An SBA Loan: A Complete Guide

You’re ready to take your business to the next level. Perhaps you want to add to your team of all-stars, or you want to upgrade your equipment with the latest and greatest technology. Maybe you’re a startup and you’re ready to bring that next great idea to life. No matter how you slice it, starting or upgrading your business hinges on one big question: how are you going to pay for it?

Most of us don’t have unlimited amounts of cash at our disposal, so we have to rely on outside help to fund new projects, renovations, and other expensive initiatives to launch and grow our businesses. When it comes to financing, smart small business owners know that you can’t go wrong with a loan from the Small Business Administration.

That’s why you’re here. You’ve heard about the benefits of SBA loans and now you’re ready to get funded. There’s just one problem: you don’t know how to begin when it comes to the application process.

While it may be intimidating, the SBA loan application process isn’t that much different from getting a loan from your bank. However, knowing what to expect before you get started can help the process go much more smoothly and eliminate the hassles and headaches that come with being unprepared.

Take a deep breath and read on to find out how to complete the SBA loan process from start to finish.

The Basic SBA Loan Application Process, Step-by-Step

1. Determine Whether You Meet The SBA’s Lending Requirements

Before you even fill out an application or talk to a lender, the first step to obtaining an SBA loan is to make sure that you’re qualified to receive one. In order to obtain a loan from the SBA, your business must qualify as a small business under the organization’s guidelines. Typically, this means that your business must have no more than 500 employees, although this number could rise based on your industry. Net annual income should not exceed $5 million, while the business’ net worth shouldn’t be more than $15 million.

To be eligible for an SBA loan, the business must also be operated and headquartered in the United States. The small business should be for-profit (although non-profit child care centers qualify for SBA Microloans) and not engaged in illegal activities. Businesses involved in lending, investing, and real estate rentals do not qualify for most programs.

Depending on which loan program you select, there may be additional requirements. For example, only veterans, service members, or the spouses or widows of veterans or service members can apply for the Veterans Advantage program. The Community Advantage program is limited to underserved areas, which include low-income communities and businesses owned by women, minorities, and veterans.

One of the most important factors in the SBA lending equation is your credit report and score. Because SBA loans offer such competitive terms, it should come as no surprise that you need a good credit score to qualify. In general, a minimum score of 680 is required to even be considered for these loans.

Your score isn’t all that comes into play, though. Your full credit report (both personal and business) will be evaluated by a lender to determine if you qualify. Defaults on previous government-backed loans will disqualify you from receiving an SBA loan. Foreclosures or bankruptcies may also prevent you from receiving an SBA-backed loan. Negative items on your report, such as collections or past due accounts, won’t necessarily bar you from receiving a loan, but a valid explanation for each negative item will be required by the lender.

This is why it’s so important to know your score and review your report before even starting the process. It’s easy to obtain a free credit score and report so that you can make sure you qualify and dispute any erroneous items. If you find that your credit score is low, you can begin taking steps toward improving your credit before you apply.

2. Choose An SBA Loan Program

You’ve determined that you fit all of the requirements for obtaining an SBA loan. Now, the next step is to understand the SBA loan programs that are available and which works best for you. Each program has specific rates, terms, and maximum loan amounts, as well as requirements for how the money is used.

You’ll need to evaluate your business needs to decide which program is the best fit.

Loan Program Description More

7(a) Loans

Small business loans that can be used for many many business purchases, such as working capital, business expansion, and equipment, inventory, and real estate purchasing.



Small loans, with a maximum of $50,000, which can be used for working capital, inventory, equipment, or other business projects.


CDC/504 Loans

Large loans used to acquire fixed assets such as real estate or equipment. 504 Loans are offered in partnership with Community Development Companies (CDCs) and banks.


Disaster Loans

Loans used to rebuild or maintain business following a disaster. 


7(a) Loans

SBA 7(a) loans are the most popular among small business owners. This is primarily because of the extremely favorable terms and the flexibility with how funds can be used. With the 7(a) program, loan proceeds can be used toward just about any business expense. This includes purchasing equipment or inventory, acquiring a new business, renovating new facilities, working capital, or even refinancing old, high-interest debt. Standard 7(a) loans have a maximum loan amount of $5 million.

Through the Community Advantage program, underserved communities can receive financing when traditional lending isn’t a good fit. The Veterans Advantage program offers the same great benefits along with reduced guarantee fees. Express loans offer less funding but guarantee an approval response within 36 hours. It’s important to note that loans through the Express program come with a slightly higher but still competitive interest rate than other 7(a) loans.

In general, expect to pay between 7% to 9% interest on standard 7(a) loans. Repayment terms are up to 10 years for most purposes and 25 years for real estate purchases. Startups and established businesses are eligible to apply for 7(a) loans. This program is a good fit for almost any small business because these loans are the most flexible. SBA 7(a) loans are available through SBA-approved lenders, including banks and credit unions. Read more about SBA 7(a) loan programs.

Loan Amount Less Than Seven Years More Than 7 Years

Up to $25,000

Base rate + 4.25%

Base rate + 4.75%

$25,000 – $50,000

Base rate + 3.25%

Base rate + 3.75%

$50,000 or More

Base rate + 2.25%

Base rate + 2.75%


Small businesses requiring smaller amounts can apply for an SBA Microloan. Microloans are available through participating nonprofit organizations. The maximum borrowing amount through this program is $50,000. This money can be used for a variety of purposes, including the purchase of supplies, materials, and equipment. It can also be used as working capital. Microloans can’t be used for the purchase of real estate or paying delinquent taxes.

Like other SBA loan programs, SBA Microloans come with competitive interest rates. These rates are based on the intermediary lender’s cost of funds. The average rate is about 7.5%.

These loans are best for startups and small businesses that need smaller loans. This is also an excellent choice for non-profit childcare centers that are ineligible to apply for loans through the 7(a) program. If a microloan program seems like the right fit for your business, read on to learn more.

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business


Collateral normally required, but depends on the lender

Down Payment

  • No down payment for most businesses
  • Possible 20% down payment for startups
  • Possible 10% down payment for business acquisition loan

504 Loans

The SBA’s 504 loan program is designed for businesses that want to expand or upgrade their facilities or equipment. Funding of up to $5 million is available through the SBA’s 504 program to purchase buildings or fixed assets, to build or update new facilities, or to purchase or improve land. Proceeds can also be used toward refinancing existing debt related to renovating, purchasing, or building new facilities or equipment.

Through the 504 program, the SBA will provide up to 40% of the total project cost through a Certified Development Company. Fifty percent of the project costs must be financed through a traditional lender. The remaining 10% of costs are the responsibility of the borrower. Interest rates for SBA 504 loans are based on 5-year and 10-year Treasury issues. Repayment terms are set at 10 years and 20 years.

Small business owners that wish to update or expand their facilities or equipment are the best candidates for this loan program. If this sounds like you, learn more about the terms, eligibility, and requirements of SBA 504 loans.

SBA 504 Loans

Borrowing Amount

No maximum, but the SBA will only fund up to $5 million

Term Lengths

10 or 20 years

Interest Rates

Fixed rate based on US Treasury rates

Borrowing Fees

  • CDC servicing fee, CSA fee, guarantee fee, third party fees (however, most of these fees are rolled into the interest rate or cost of the loan)
  • Possible prepayment penalty

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business


Collateral required; usually the real estate/equipment financed

Down Payment

10% – 30%

SBA Disaster Loans

Sometimes, the unexpected happens. Whether it’s a sudden deployment, a natural disaster, or changes within the economy, these unforeseen events can have damaging effects on a business, even leading some owners to shut their doors for good.

The SBA understands these situations and offers various Disaster Loan programs designed to help small businesses weather the storm. These loans include Physical Disaster Loans, Economic Injury Disaster Loans, and Military Reservists Economic Injury Loans.

Through the Physical Disaster Loan program, businesses and nonprofit organizations can receive up to $2 million for the repair or replacement of damaged property. This includes real estate, fixtures, inventory, and equipment used to operate the business. Loan proceeds can be increased to offer protection from future disasters, covering losses that are uninsured or under-insured and providing business owners with an extra level of protection. Repayment terms can be set up to 30 years, and interest rates are set at 4% and 8%.

Through the Economic Injury Disaster Loan, businesses and nonprofit organizations can apply for up to $2 million if economic injury occurs. This money can be used to cover financial obligations that would have been paid by the business had it not been affected by the disaster. Repayment terms are up to 30 years with interest rates set by the SBA at 4% and 8%.

The Military Reservist Economic Injury Disaster Loan is designed for reservists who have been called for active duty. These loans are used for the working capital needed to pay business expenses until the employee returns from active duty and business operations recover. They cannot be used for refinancing debt, business expansions, or to cover income or profit losses. The total amount of the loan is based on the actual economic injury as determined by the SBA. Interest rates for these loans are set at 4% with a maximum repayment term of 30 years.

Term Rate/fee

Borrowing Amount

Maximum $2 million

Term Lengths

  • Max 30 years if no credit available elsewhere
  • Max 7 years if credit available elsewhere

Interest Rates

  • Maximum 4% if no credit available elsewhere
  • Maximum 8% if credit available elsewhere


None from the SBA; possible fees from outside agencies

3. Decide On An SBA Partner Lender

Once you’ve narrowed down your loan options and have selected the program that’s right for your business, you’ll need to find an intermediary. SBA loans do not come directly from the SBA to the borrower. Instead, these government-backed loans are provided through approved lenders including banks, credit unions, private lenders, CDCs, and nonprofits. Because the SBA guarantees at least 50% of loan proceeds (and in most cases, 85%), lenders are more willing to provide these loans to qualified small businesses.

This doesn’t mean that you can just walk into any bank and receive an SBA loan. You have to find an SBA lender partner that services your area. There are a few different ways that you can do this.

The first thing you can do is consult any financial institution with which you have a working relationship. Explain the type of SBA loan that you’re looking for and ask for a referral for local SBA intermediaries.

You can also visit the SBA website, which offers a Lender Match service. Simply input a small amount of personal information, and this tool will match you to a lender that services your area.

SmartBiz is another option you can consider. You can quickly and easily find, apply for, and receive an SBA loan through this service. This online loan marketplace can also match you up with other sources of funding if you don’t qualify for an SBA loan. There are also loan matching services and online brokers that can help you find a lender and offer support through the application process.

4. Compile An SBA Loan Application

Once you’ve found an SBA-approved lender, it’s time to dive into the actual application process. This process can be a little intimidating, but it doesn’t have to be difficult provided you know what to expect going in. The most important thing is to make sure you come prepared with the proper documentation.

SBA borrower information forms are required for every partner, director, managing member, or owner of the company. All owners with at least a 20% stake in the company should also be prepared to sign a personal guarantee and have their resumes available. Personal financial statements will also need to be provided.

For the business, an income statement, balance sheet, and federal income tax returns for the last three years must be provided. A cash flow projection for a period of one year will also need to be included with the application. Business and personal credit reports will also be used to determine your creditworthiness.

For collateral requirements, real estate appraisals, lease agreements, and environmental reports are required. Additional documentation including Articles of Organization, all business licenses, and information pertaining to judgments and lawsuits may also be needed. Affiliated and subsidiary business information will need to be provided during the application process.

Before meeting with the lender, you can inquire about any additional documentation that is needed so that it can all be compiled prior to filling out the application.

5. Be Available For Follow-Up Questions

Once the application has been submitted for your SBA loan, the next step is to wait for your approval. Depending on the loan you’ve applied for, approval can take several weeks, although some options — like SBA Express loans — will be approved within 36 hours.

During this time, you should communicate with your lender and make yourself available for any additional follow-up questions. More documentation may be required by the lender, so make sure that you deliver this in a timely manner to avoid delays in the application process. Typically, you should expect the entire process from application to funding to take 30 to 90 days.

How To Apply For An SBA 504 Loan

The SBA 504 loan process is a bit different than the standard SBA loan process. More documentation is required for these loans. This includes but is not limited to estimates, quotes, and costs from vendors and contractors that will be working on the funded project. For real estate purchases, an independent appraisal is required.

Because the borrower will also be working with another lender, a letter of intent from the lender will need to be submitted with the SBA application. The lender will also need to provide a reason for why it will not provide financing for the entire project.

If debt is to be refinanced using 504 loan proceeds, the borrower must provide information on the current debt, including lien instruments and account transcripts.

How To Apply For An SBA Loan To Buy A Business

When SBA loan proceeds are used to purchase a business, the process does not differ much from what it would be when applying for any other loan. Credit reports and financial documentation will be required to determine eligibility. However, there are a few additional documents needed for approval of the loan.

If real estate is being purchased using the loan, business, stock, and asset purchase agreements are required. A real estate purchase agreement is also needed and will be submitted along with other documentation and the SBA loan application.

A business plan is also typically required. The applicant must also show that they have experience in the industry of the business they plan to acquire.

How To Apply For An SBA Loan For A Startup

If you’re a startup business (defined by the SBA as a business that has been in operation for 2 years or less), there are a few different requirements for applying for an SBA-backed loan.

There are certain documents that startups simply won’t have, such as three years’ worth of business income tax returns. However, alternative documentation can be used to qualify a new business, including a detailed business plan, a cash flow analysis, and financial projections of at least one year.

To qualify for SBA loans, startups must be able to show through this documentation that they will be successful and profitable, despite their short operating history. The applicant must also show proof of industry experience.

How To Apply For An SBA Loan For A Franchise

SBA loans are available for franchises. In many cases, loans for a franchise are easier to obtain than for the purchase of other new businesses because the franchise has a proven business model.

The organization has its own SBA Franchise Directory. This directory has a listing of all brands that are eligible to receive financing from the SBA. This list includes everything from restaurants to dry cleaners and insurance agencies. All brands that meet the FTC definition of a franchise are included on the list.

Some franchises do not fit under the FTC’s definition of a franchise. In these cases, the SBA has the option to add brands to the directory if it meets other requirements.

Financing, including the 7(a) standard loan, can be obtained to purchase a franchise. The same documentation for other SBA loans applies. In addition, agreements between the franchisor and franchisee will also need to be produced, as well as other documentation.

SBA Loan Application Process FAQs

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

The time it takes to get approval on your SBA loan varies. Gathering the needed documentation may take weeks, while the approval process itself can several weeks or even months, especially if more information is required.
Applicants who need approval in a hurry can turn to the SBA Express loan. Even though this provides lower maximum funding than other SBA loan options, approval is guaranteed within 36 hours. However, it’s important to note that the actual underwriting and funding of the loan will take additional time.

Where do I apply for an SBA loan?

To apply for an SBA loan, you will need to work with an SBA-approved lender. Use the SBA Lender Match tool, a loan broker like Lendio, or consult with your existing financial institution to find a lender near you.

You can also use the SmartBiz marketplace online to prequalify and apply for SBA loans. If you don’t qualify, other lending options are available through SmartBiz.

I have bad credit. Can I still be approved for an SBA loan?

Your creditworthiness is an important factor in getting approved for an SBA loan. If you have a credit score that falls below 680, it’s unlikely that you’ll be approved.

If you need a loan but don’t qualify for an SBA loan, don’t worry – you have options. The first thing to do is begin working on your credit. Obtain your free report and score, then follow these helpful hints for boosting your score.

In the meantime, you can also check out your other business loan options. Online small business loans can be obtained with credit scores as low as 500. While the terms may not be as favorable as with SBA loans, there are still some great options out there that will help you get the financing you need today.

What if I need assistance with my SBA loan application?

Navigating the SBA loan application process can be difficult, but you don’t have to do it alone. If you have questions about completing your loan application, you can always ask your SBA-approved lender. If you haven’t yet found a lender to work with, SCORE is a great resource. This nonprofit organization provides resources and services including free business mentors that can help you through every step of the process.

I don’t qualify for an SBA loan/my application was rejected. What are my options?

If you don’t qualify for an SBA loan or your application was rejected, you’re not alone. SBA loans are extremely competitive and getting this type of funding can be difficult. However, this doesn’t mean that you’re stuck without the financing you need. Instead, you can apply for a non-SBA business loan.

Online business loans have less stringent requirements. Terms vary depending on the lender you work with and your creditworthiness. Installment loans, short-term loans, lines of credit, credit cards, and other financing options are available through online business lenders. To find the loan that’s right for you, check out this comparison of the most popular small business loans.

Final Thoughts

SBA loans are a great option for small business owners, but the application process can be frustrating when you don’t know what to expect. Being prepared, gathering your documentation in advance, and knowing what to expect beforehand can help simplify the process, putting you on the path to financing for your small business.

The post How To Apply For An SBA Loan: A Complete Guide appeared first on Merchant Maverick.



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