Navigating the SBA Loan Programs

Let’s face it—the process of getting a business loan can seem daunting. Whether you’re starting a business or growing one, you want to be sure you’re getting the right kind of loan that will help you live out the American Dream. An SBA (Small Business Administration) loan is an excellent choice for a small businesses in need of funding. The thing to understand about SBA loans is that the SBA does not lend to small businesses directly. Rather, it sets the guidelines and backs the loans that are then lent by approved financial institutions.

So how do you know if you’re eligible for an SBA loan? Ask yourself these questions:

  • Is your business a for-profit organization?
  • Is your business currently operating?
  • Is your business located in the US?
  • Is your business considered “small” as defined by the SBA?
  • Does your business demonstrate a need for the desired credit?
  • In the case of real estate, is the property at least 51% owner occupied by borrower?
  • For a construction project, is there at least 70% occupancy by the owner initially? However, the owner may permanently lease up to 20% and temporarily lease an additional 20% with the intention of using some of the additional 20% within three years and all of it within 10 years.

There isn’t a one-size-fits-all option for an SBA loan. For eligible businesses, there are multiple types, and navigating the details of these different programs can be challenging. That’s why SBA has “approved” banks, and you should always consult with an SBA lending expert. But to give you a general idea of the 3 most commonly used SBA loan programs, here is a quick guide:



  • Loans up to $5 million, guaranteed 75-85%, dependent on size
  • 7-10 repayment terms for working capital
  • 10 year terms for equipment
  • Up to 25 year repayment terms for real estate
  • Interest rates are based on NY Prime rate plus a margin
  • Personal Guarantees are always required

SBA 7A loans are used for working capital, business acquisitions, refinance, equipment purchases, leasehold improvements, business expansions, franchise lending, and real estate transactions.  They typically require at least a 10% equity injection (sometimes more), which is often appealing to the borrower.  Also, in comparison to conventional business loans, this type of loan will allow for longer term and amortization schedules which will help lower the proposed monthly payments and help the borrower have additional cash flow for other business needs.  Unlike the SBA 504 listed below, you can purchase real estate, some equipment, and working capital all in one loan if you would like, which is very convenient.


SBA Express

  • Loans up to $350,000, 50% guaranteed
  • Repayment terms same as 7A but may be used as a revolving line of credit up to 7 years

These types of transactions are really geared toward the small business loans, since the maximum loan amount is $350M.  Typically, you see borrowers getting a small working capital line of credit.  Usually, that is structured as revolving for 24 months and then term out for 60 months.  This allows borrowers to have access to a line, and then in that two year period they may qualify for conventional financing.


SBA 504

  • Provided through a Certified Development Co. (CDC)
  • Loans up to $5 million, funding split between CDC (up to 40%), bank (50%), and borrower (10%)
  • Funds used only for fixed assets (real estate, machinery, & equipment)
  • 10 year and 20 year repayment terms are offered, with fixed interest rates on the CDC portion

These are geared more toward real estate and purchases of heavy equipment (like manufacturing or medical equipment, etc).  504 loans are not available for any refinances at this time.  In most cases, there is a 10% equity injection requirement (sometimes more), depending on whether the collateral is of a single or special use or if the business is a startup.  This loan will have a 10 year repayment for most equipment and 20 year repayment for the real estate.