FAQs Answered: SBA Loans

Q: What are SBA loans?

A: SBA loans are small-business loans that are backed by the U.S. Small Business Administration. The agency partners with local banks and credit unions to provide affordable loans for a range of purposes. The SBA also makes direct loans to business owners recovering from a federally declared disaster.

Q: What types of SBA loans are available?

A: There are several different SBA loan programs. 7(a) Loans are the most common and the most versatile. 504 loans are a popular choice for fixed assets. Microloans are loans of smaller amounts for shorter terms. Express loans feature an accelerated turnaround time. Low-interest disaster assistance loans help businesses and homeowners recover from declared disasters.

Q: What are the main benefits of SBA loans?

A: SBA loans offer small businesses key advantages, including competitive rates, lower fees, longer terms, more flexibility, and continued support in the form of free and low-cost business training and counseling provided by the SBA and its local partners.

Q: Am I qualified for an SBA loan?

A: Different SBA loan programs and lenders have different requirements. Generally, your business must meet SBA size standards, operate in an eligible industry, and be registered and physically located in the U.S. You’ll also need to demonstrate owner equity, a sound business plan, and the ability to repay funds.

Q: What can SBA loans be used for?

A: Each type of SBA loan has its own scope. SBA 7(a) loans can be used for a range of purposes, including real estate, equipment, working capital, and refinancing existing debt. SBA 504 loans are only for long-term fixed assets.

Q: What is the maximum amount I can borrow with an SBA loan?

A: For SBA 7(a) and 504 loans, the typical maximum loan amount is $5 million. Express loans top out at $500,000 and microloans top out at $50,000.

Q: What are the interest rates and fees for SBA loans?

A: Rates vary by lender and program, but they’re capped by the SBA, keeping them affordable. The SBA also limits the types of fees that lenders can charge. You won’t pay processing, origination, application, or brokerage fees. However, you may need to pay an upfront guaranty fee and an annual service fee.

Q: What kind of equity or collateral is needed for an SBA loan?

A: Most SBA loans require an owner equity contribution of at least 10%, outside collateral including equity in personal real estate, and/or a personal guarantee.

Q: What are the repayment terms for SBA loans?

A: Compared to conventional loans, SBA loans usually come with longer terms, with maximum maturities ranging from 10 years (for working capital, inventory, and equipment) to 25 years (for real estate).

Q: What’s an SBA Preferred Lender?

A: SBA Preferred Lenders are local financial institutions that are authorized to process, close, and service SBA loan applications. To receive this designation, lenders have to meet strict standards set by the SBA and demonstrate a track record of successfully processing and servicing small-business loans.

Q: How many SBA loans can I have at once?

A: The SBA doesn’t limit the number of SBA loans a borrower can have at one time, as long as each loan is in good standing and the aggregate balance doesn’t exceed the maximum amount for that loan type (e.g., $5 million for SBA 7(a) and 504 loans). However, partnering lenders may have stricter requirements. 

Q: Can SBA loans be combined with other types of loans?

A: Yes, SBA loans can often be combined with conventional loans or other forms of non-SBA financing. This can be beneficial if you need additional capital beyond what an SBA loan can provide.

Q: How long does it take to get an SBA loan?

A: For most SBA loans, the whole process generally takes between 60 and 90 days. True to their name, Express loans are usually faster, with a typical turnaround time of 30 to 60 days.

Q: What kind of documentation do I need to provide to get an SBA loan?

A: Your lender will give you a complete checklist of required documents. Commonly requested items include profit and loss statements, projected financial statements, business licenses or certificates, income tax returns, leases, and complete business plans.

Q: How do I apply for an SBA loan?

A: If you’ve determined that your business meets basic eligibility requirements, you’ll be able to work directly with your chosen lending partner to learn more and get things started.