SBA Loans

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What is SBA loan?

SBA loans are business loans guaranteed by the Small Business Administration. Via multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender-typically banks.

The government guarantee lessens the risk for banks, allowing them to lend to small business owners who may not qualify for a traditional bank loan. The three main SBA loan programs let you borrow money for nearly any business purpose-including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate.

SBA Loan Type

There are several different SBA loan programs out there, with the 7(a) loan programs being the most popular one.

┬áThe SBA loan program you’ll want to apply for depends on the size, age, and goals of your business.

SBA 7(a) Loans

The guarantee fee on 7 (a) loans ranges from 0.25% of the guaranteed portion of the loan to 3.5% of the guaranteed portion up to $1 million, plus 3.75% of the guaranteed portion over $1 million. Be aware that your guarantee fee might be included in the total cost of the loan.

Some partnered banks might also charge an origination fee or a loan packaging fee, depending on which banks you’re working with.

Here are the details you need to know about the 7(a) program:

Interest Rates

SBA 7(a) loans come with interest rates in either fixed or variable (typically adjusted quarterly) varieties. Your bank lender determines which it will offer.

To protect borrowers, the SBA puts a ceiling on 7(a) loan rates by limiting the “spread” a bank is allowed to apply on top of the loan’s base interest rate.

In other words, the SBA restricts how much a bank can make off your SBA loan. if your loan amount is more than $50,000 and the term is less than seven years, your rate will be set by the prime rate and the maximum spread will be at most 2.25 percentage points (prime rate + 2.25%). For SBA loans of more than $50,000 and seven years or longer, your rate will still be determined by the prime rate, but that spread increases to 2.75 percentage points (prime rate + 2.75%).

Like all types of loans, the interest rate you end up paying depends on your credit score and the length of your repayment term. And finally, when you get your offer, be sure to calculate your APR. The APR will be different than your interest rate, incorporating any guarantee fees or origination fees you’re charged to get the true cost of the SBA loan.

See all current SBA loan rates below .

Repayment Term

What would an SBA 7(a) loan mean for your business’s cash flow? You can expect monthly
payments for 25 years for real estate and up to 10 years for equipment and working capital.
Keep in mind: these are the longest terms you’ll find, giving you plenty of time to figure out how to make each payment and spreading those large, long-term loans over many years.


The SBA charges a guarantee fee for the service of guaranteeing the loan.
loans are generally slower to fund and require a lengthy application, so businesses will need to
meet high requirements to qualify.


Up to $5M


Up to 25 years


Starting at 5.5%


As fast as 2 weeks

Pros and Cons of SBA 7(a) Loan


Low down payments
Long payment terms
Reasonable interest rates
Suitable for a wide range of business purposes


Lengthy paperwork
Longer approval times
May require collateral

How to Apply for an SBA Loan

If you think an SBA loan is right for your business, you’ll want to decide what type of SBA loan you want to apply for, evaluate your qualifications, and find a lender to work with.

As we mentioned, the SBA loan process can be lengthy and complicated. You’ll need to provide documents like financial statements, information on your collateral, a description of your business, and a statement of how you’ll use the loan proceeds, among others.

The complete list of loan documents you may need are as follows:

Driver’s license
Voided business check
Bank statements
Balance sheet
Profit & loss statements
Business tax returns
Personal tax returns
Business plan
Business debt schedule
The participating bank will look for applicants with good credit, a solid business plan, profitable businesses (most of the time, not always), and a demonstrated ability to repay the loan.

Your borrowing history is especially important to the bank you’re working with for an SBA loan.

For more information on how to apply for an SBA loan, check out our resources below.