How to Prepare and Apply for an SBA Loan
(or keep reading below)
What is the SBA?
The Small Business Administration (SBA) is a federal agency that exists to empower and assist small businesses.
The SBA plays a pivotal role in driving economic growth, job creation, and innovation through a wide range of programs and services, including financial support such as loans and grants, counseling, mentorship, and resources for small business owners.
Contrary to popular belief, the SBA doesn't lend money directly. Instead they provide a government-backed guarantee to lenders which reduces their risk and allows them to charge less interest.
This guide will cover the process and requirements for accessing the SBA’s most coveted loan program: SBA 7(a).
SBA Loan Programs
The Small Business Administration (SBA) offers several loan programs to assist small businesses. The two most popular being:
7(a) Loan Program: The most flexible loan program, provides financial assistance to small businesses for various purposes, including working capital, purchasing equipment, and debt-refinancing.
The 7(a) program also offers subprograms, including the Standard 7(a) Loan and the SBA 7(a) Express Loan.
504 Loan Program: The 504 loan program provides long-term, fixed-rate financing for the acquisition of major fixed assets such as real estate and equipment. It is often used for expansion or modernization projects.
SBA 7(a) Program at a Glance
Loan Amount
$50,000 - $5,000,000
Interest Rate
10.25% - 12.25%
Time to Fund
2 - 6 weeks
Repayment Term
10 years
Standard SBA 7(a) Loan
The gold standard when it comes to small business financing.
Here’s what you need to know:
General Eligibility:
2 years in Business
$250,000 in annual revenue
675 FICO score
No bankruptcy in the past 3 years
Interest Rate: 10.25% *
Loan Amount: $50,000 - $5,000,000
Repayment Term: 10 years (no pre-payment penalty)
Time to Fund: 4 to 6 weeks
Use of Proceeds: Working capital, inventory, hiring, marketing, refinancing debt.
Required Documentation:
2 years of business and personal tax returns
Year-to-date profit & loss and balance sheet
Debt schedule
6 months of bank statements
* Loan rate is set at: Prime Rate + 2.75%. All approved applicants get the same rate.
SBA 7(a) Express Loan
A lesser known program, but equally competitive, and with less documentation requirements.
Here’s what you need to know:
General Eligibility:
2 years in Business
$150,000 in annual revenue
700 FICO score
No bankruptcy in the past 3 years
Interest Rate: 12.25% *
Loan Amount: $50,000 - $150,000
Repayment Term: 10 years (no pre-payment penalty)
Time to Fund: 2 weeks
Use of Proceeds: Working capital, inventory, hiring, marketing, equipment.
Required Documentation:
2 years of business tax returns
1 year personal tax returns
* Loan rate is set at: Prime Rate + 3.75%. All approved applicants get the same rate.
Business Credit
FICO SBSS (Small Business Scoring System) is a credit score used to evaluate the creditworthiness of small business financing guide. It's determined by considering both the business's credit history and the personal credit of the business owner. The score ranges from 0 to 300, with 300 being the highest.
Factors that influence the SBSS score include personal and business credit scores, the financial status of the business, cash flow and revenue, the business's longevity, and any liens or judgments against it. However, the exact weight of each factor in FICO's calculation is proprietary and not disclosed.
To qualify for an SBA loan Information Guide, a minimum score of 155 is required, but most SBA lenders prefer scores in the range of 160 to 170.
If you haven’t seen our “how-to” guide on building business credit, you can get a free copy here.
A Roadmap to SBA Success
Given the low approval rate of SBA loan information guide (~30%), we've created this guide to help improve your approval chances. Here’s what a typical applicant roadmap looks like:
Step 1. Prepare Your Business and Personal Finances
Before applying for an SBA loan, ensure your financial house is in order. This includes applicable loan documents.
Step 2. Choose the Right SBA Loan Program
Select the SBA loan program that aligns with your business needs, industry, and financing requirements.
Step 3. Find an SBA-Approved Lender
Reach out to potential lenders to discuss your business and loan needs. Make sure you discuss rates and fees!
Step 4. Complete and Submit Your Loan Application
Gather the necessary documentation and submit your loan application. Having all your documentation (see ‘required documentation’ above) ready can significantly reduce the time to receive your funds.
Notes & Disclaimers
The quoted interest rates provided are for SBA loan information guide purposes only and may not reflect the actual rates available to individual borrowers. Actual interest rates may vary based on several factors, including creditworthiness, loan amount, term, and lender policies.
The information provided about financial products is for informational purposes only and should not be considered financial advice. It does not constitute an offer, endorsement, or recommendation of any specific product or service.
Before making any financial decisions, carefully consider your individual financial situation and goals, and/or consult with qualified financial professionals and conduct your own research to assess the suitability and risks associated with any financial product or investment and ensure that it aligns with your financial needs, capacity, and goals.
SBA Loan Information Guide: A Step-by-Step Path to SBA Funding
By many metrics, an SBA loan is the gold standard of small business financing. When you qualify for an SBA loan, you get transparent interest rates, and repayment terms that span 10 years. The long terms in particular are what makes SBA loans so sought after, as it makes your monthly payments much lower than more traditional financing products, which frees up your cash flow and allows you to focus on growth, without the stress of high monthly payments.
Most small business owners have heard of SBA loans, but not many know how they work, and even fewer know how to qualify for one. To help small businesses, we put together an SBA loan information guide. This short guide gives you a high-level understanding of how SBA loans work, what it takes to qualify, and actionable steps you should take to put yourself in a position to get approved. In short, we put over a decade of small business lending experience into a simple guide. And the best part – it’s completely free.
In this guide we give a short introduction to the different SBA loan programs, with a particular focus on SBA 7(a) loans as they are the most flexible financing solutions backed by the Small Business Administration. Among other things, we break down:
What SBA 7(a) loans can be used for (working capital, equipment, marketing, etc.)
How interest rates are determined
Documents that an SBA lender will require
What the SBA lenders look for in an approval (business credit score, personal credit, revenue, time in business, etc.)
One unique aspect that we include, that we feel has been left out of most information you can find on SBA loans, is the FICO SBSS (Small Business Scoring System). This is a business credit score that lenders use in their risk assessment. We give you insight into what goes into it, but more importantly, how you can build it up. As your business credit score is influenced by your personal credit score, we recommend you also take a look at our guide on building business credit. This guide will help you boost both your business and personal credit.
More than just a checklist, this guide serves as a roadmap on what to expect if you choose to pursue this highly coveted source of capital. Our goal is to demystify most aspects of the process to help you feel confident and in the loop of how things work behind the scenes. Whether you’re a seasoned veteran or applying for an SBA loan for the first time, this SBA loan information guide will help you stay organized, get your ducks in a row, and avoid common mistakes we have seen applicants make in the past.
While it may feel daunting, our hope is that with the right guidance, you can feel more empowered and significantly improve your chances of getting approved. Our view is that, while financing can be crucial to growing your business, it shouldn’t be all-consuming, and it certainly shouldn’t be a source of stress. So use this guide to take the guesswork out of the SBA loan process and focus on the things that matter – running a successful business.