How SBA Loans Work
A plain-English guide to the SBA loan process — from pre-qualification to funding.
What Is the SBA?
The U.S. Small Business Administration (SBA) is a federal agency that helps small businesses get financing by guaranteeing a portion of the loan. This reduces the lender's risk, allowing them to approve loans they otherwise couldn't — at better rates and terms than conventional financing.
The SBA Loan Process
Assess your eligibility based on credit, revenue, years in business, and loan purpose. Use our free tool above.
Determine if 7(a), 504, or Microloan fits your needs. Our AI recommends the best fit.
Work with an SBA-approved lender or use the SBA Lender Match tool. We can connect you.
Gather tax returns, financial statements, business plan, and SBA forms. We generate these for you.
Your lender packages the application and submits to the SBA for guarantee approval.
The lender and SBA review your application. This typically takes 2–8 weeks.
Sign loan documents, pay closing costs, and receive your funds.
Typical Timeline
SBA vs. Conventional Loans
| Feature | SBA Loan | Conventional |
|---|---|---|
| Down Payment | 10–15% | 20–30% |
| Interest Rate | Below market | Market rate |
| Repayment Term | Up to 25 years | 5–15 years |
| Collateral Required | Preferred, not always | Usually required |
| Startup-Friendly | ✓ Yes | ✗ Usually no |
| Approval Speed | 30–90 days | 2–4 weeks |
Expected Costs and Terms
SBA loans carry several fees in addition to interest. Here's what to budget for across all three major programs.
Interest Rates
| Program | Rate Type | Current Range | Indexed To |
|---|---|---|---|
| SBA 7(a) | Variable | Prime + 2.25% – 4.75% (≈ 10.75% – 13.25% today) |
WSJ Prime Rate |
| SBA 504 | Fixed (CDC portion) | 5.5% – 6.5% (set monthly by SBA) |
10-yr Treasury |
| Microloan | Fixed | 8.0% – 13.0% | Set by intermediary |
SBA Guarantee Fees (7(a))
| Loan Amount | Guarantee Fee (on guaranteed portion) |
|---|---|
| Up to $150,000 | 0% (waived) |
| $150,001 – $700,000 | 2.0% |
| $700,001 – $1,000,000 | 3.0% |
| $1,000,001 – $5,000,000 | 3.5% (plus 0.25% above $1M) |
Guarantee fees are typically financed into the loan, not paid out of pocket at closing.
Other Costs to Budget For
Charged by the lender, not the SBA. Negotiable with some lenders.
Required for real estate or equipment-secured loans.
Charged by some lenders or third-party packagers to prepare your application.
Title, legal, filing, and environmental fees — varies by loan type and state.
Ongoing SBA fee on 7(a) loans over $150K, charged annually.
Applies to 7(a) loans over 15 years if paid off early. None on shorter terms.
Repayment Terms at a Glance
| Program | Working Capital / Equipment | Real Estate |
|---|---|---|
| SBA 7(a) | Up to 10 years | Up to 25 years |
| SBA 504 | 10 or 20 years (equipment) | 20 or 25 years |
| Microloan | Up to 6 years (all uses) | |
Ready to Start Your SBA Journey?
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