SBA Loans
Getting your small business off the ground — or taking it to the next level — usually requires a cash injection. SBA loans are often considered the gold standard of business lending because they offer long terms and capped interest rates, but they can be hard to qualify for and don’t always offer the lowest rates on the market.
What is an SBA loan?
An SBA loan is a type of small business financing that is backed by the U.S. Small Business Administration (SBA). Despite what you might think, these loans aren’t issued by the federal government. Instead, the SBA guarantees a portion of these loans, which are issued by individual banks, credit unions and online lenders.
Think of the SBA as a co-signer on these loans. By promising to pay back a portion of the funds if you default on your loan, the SBA reduces risk for the lender. This encourages lenders to offer loans to small businesses that might not otherwise qualify for financing.
It depends. Generally speaking, the best loan for your business is the loan offering the most competitive rates and terms. The SBA sets interest rate limits to keep costs from getting too high, and SBA loans offer long terms, which can make your monthly payments more manageable. Which means that for some business owners, an SBA loan offers the best rates and terms.
But established businesses with strong credit profiles might actually be able to get a lower interest rate with a traditional loan. The average interest rate for a business term loan in Q3 2025 was around 7.2%, which is lower than the cap for even the smallest SBA loans. And startup companies and small businesses with challenged credit may have a hard time qualifying for an SBA loan.
All this means that you won’t really know if an SBA loan will offer you the lowest rate until you get direct quotes for your business, and it’s typically a good idea to get quotes for multiple loans to find the best rate.
Pros and cons of SBA loans
Before you decide to move forward, make sure you weigh all the pros and cons of SBA loans:
Pros
- Broad eligibility requirements
- Capped interest rates
- Wide range of loan amounts
- Long repayment terms
- Relatively flexible use of funds
- Access to small business resource centers
Cons
- Slow approval process
- Prepayment penalties
- May require collateral
- May require down payment
- May be difficult for startups and borrowers with poor credit to qualify
- All loans require a personal guarantee
How LendingTree works with SBA lenders
With LendingTree, you can fill out one simple form to be matched with potential loan offers from our network of 30+ business lenders. This network includes both SBA and non-SBA lenders, so you may be matched with SBA loans, non-SBA loans or a mix, depending on what you qualify for.
Here’s how it works:
Tell us what you need
It only takes an average of two minutes to tell us who you are and how much money you need. Plus, the process is free, simple and secure.
Compare your options
Depending on your revenue and business needs, you can compare lenders you’re matched with on your own to find the best deal or you may qualify for LendingTree’s concierge service, which provides a single point of contact to help you find the best deal.
Get your money
Pick a lender and sign your loan agreement. If you decide to move forward with an alternative lender, you could receive your money in as little as 24 hours, but SBA loans will typically be slower to fund.
While you’re comparing quotes from our network, take the time to also get a quote from your bank or credit union. Having an established relationship with a lender can sometimes increase your approval odds, and some lenders offer additional perks like rate discounts if you have a pre-existing relationship. You can also use the SBA’s Lender Match tool to connect directly with SBA lenders.
Getting quotes directly from a few banks to compare with offers from online lenders can help you make sure you’re getting the best interest rate possible. If you need additional support, you can also visit an SBA District Office.
Qualifying for an SBA loan
To qualify for an SBA loan, your business will need to meet the following criteria:
- Be a registered, legal, for-profit enterprise
- Be physically located and operating in the U.S. or its territories
- Meet SBA small business size standards
- Be creditworthy and demonstrate an ability to repay the loan
- Be unable to qualify for the amount you need using traditional financing with reasonable terms
While these broad requirements might make it seem like it’s easy to get an SBA loan, the numbers tell a different story. In 2024, SBA loan and line of credit applicants were denied nearly half the time. These applicants saw a 45% denial rate, which is more than double the 21% rate across all business loan types, according to a LendingTree study.
This is likely due to the fact that SBA borrowers also need to meet individual lender criteria. While the SBA guarantee reduces their risk, lenders still want to feel reasonably confident about your ability to repay your debt.
Specific requirements vary between lenders, but in many cases, you’ll have higher approval odds after operating for at least two years with a personal FICO Score of 650 or higher. SBA-approved lenders will also consider your debt-service coverage ratio (DSCR), which compares your business cash flow to your annual debt obligations to check your ability to take on additional loan payments.
Types of SBA loans
There are several types of SBA-guaranteed loans. These loan types fall within three overarching loan programs.
SBA 7(a) loans
Best for: Businesses seeking working capital to cover a range of expenses
This is the SBA’s primary loan program for small businesses. In many cases, when you hear someone talking about SBA loans, they’re referring to SBA 7(a) loans. These loans typically offer up to $5 million in funding, though in fiscal year 2025, the average loan size was $477,571. Interest rates on SBA 7(a) loans max out at 14.75% for fixed rates or 13.25% for variable rates, with lower caps on larger loan sizes.
SBA 7(a) loan funds can be used for a variety of purposes, including buying equipment, improving real estate, purchasing an existing business and/or as general working capital to cover your business expenses.
There are multiple types of loans within the 7(a) loan program. Here are the basics:
- 7(a) Small: Loan amounts up to $350,000.
- Standard 7(a): Loan amounts from $350,001 to $5,000,000.
- SBA Express: Loan amounts up to $500,000 with an expedited turnaround time.
- CAPLines: Cyclical financing with line of credit amounts up to $5,000,000.
The 7(a) loan program also offers SBA loans designed for businesses that export goods and participate in international trades.
Note that collateral and down payment requirements for 7(a) loans vary based on the lender and the loan size.
SBA 504 loans
Best for: Businesses looking to finance fixed assets like real estate and equipment
With the 504 loan program, the SBA offers loans up to $5.5 million with repayment terms lasting as long as 25 years. 504 loans can be used to finance a wide range of fixed assets, including buildings, facilities and long-term machinery or equipment.
The only condition is that these funds must promote business growth and job creation. Generally, businesses must create or retain at least one job opportunity for every $65,000 they receive with an SBA 504 loan, though specific requirements vary by industry and location.
In fiscal year 2025, SBA 504 loans had an average loan size of $1,154,122 — higher than the average loan size for 7(a) loans. For this reason, 504 loans may be more ideal if you’re looking to finance expensive equipment or real estate. Just keep in mind that a minimum down payment of 10% to 20% is usually required.
SBA microloans
Best for: Businesses with lower-cost needs and/or those that cannot qualify for other types of SBA loans
As the name suggests, SBA microloans provide smaller loan amounts up to $50,000 with a maximum repayment term of seven years. The average SBA microloan is around $13,000. Microloans are offered by designated intermediary lenders, which are often nonprofit, community-based organizations.
As with other types of loans, exact requirements vary between lenders. But generally speaking, SBA microloans are easier to qualify for than other types of SBA loans, with some lenders offering microloans to startups, low-income borrowers and borrowers with limited credit.
According to the Federal Reserve, 59% of businesses applied for financing in 2024, with 40% of applicants seeking less than $50,000. As such, microloans may be a viable option for many small businesses.
Variable vs. fixed-rate SBA loans
SBA interest rates are comprised of a base rate plus an additional percentage charged by the lender. The base rate lenders use for these calculations is usually the prime rate, though some lenders may use the optional peg rate instead. The prime rate has ranged from 3.25% to 8.50% in the past decade, and is currently 6.75%.
SBA loan interest rates can be fixed or variable, depending on the loan program. 504 loans have fixed rates, meaning you’ll pay the same rate for the entire loan term. But with 7(a) loans and microloans, interest rates may be fixed or variable, meaning your interest rate changes with the prime rate. If you choose a variable rate and the prime goes up, your interest rate goes up. But if the prime drops, your interest rate drops, too.
When choosing between a fixed and variable rate, consider how long you’ll be paying off the loan and if you’ll have the ability to make your payments if your rate rises. According to a Q3 2025 report by MetLife and the U.S. Chamber of Commerce, 37% of small businesses say they have had to budget for higher borrowing costs over the next year due to rising interest rates. If you’re taking out a loan with a long term, a fixed rate could give you more stability when budgeting.
SBA loan timelines
If you need money urgently, an SBA loan is likely not the answer. On average, the process takes 30 to 60 days for non-real estate loans and up to 90 days or more when real estate is involved.
Here’s a breakdown of the typical SBA loan application process step-by-step. If you’re purchasing real estate, each of these steps can take longer as both you and your lender work through due diligence.
- Preparation and application (one to 30 days): Gathering all your documents and filling out SBA forms can take some time, but making sure you provide all the necessary information upfront can minimize the back-and-forth with your lender later in the process.
- Underwriting (10 to 30+ days): During this step, the lender reviews your financials and pulls your credit. If they’re missing anything, they may contact you to collect additional documentation. Keep in mind that more complex loan packages, such as those involving collateral will take longer to process.
- SBA review (seven to 14 days): If the lender approves your SBA loan application, your information will then be sent to the SBA for a final review. During this step, you may be asked to sign or submit more documents.
- Loan packaging and closing (seven to 14 days): Once the SBA gives the final green light, the closing process can begin. This step may involve documents that are new to you, and you may also need to provide updated versions of documents shared earlier in the process. Make sure you carefully review any loan documents you’re expected to sign — but note that some documents may have a deadline, so it’s important to sign and submit required documents before this date to avoid delays.
Working with an SBA Preferred Lender can speed up the process somewhat. These lenders are given the authority to make final decisions on SBA loans without requiring a secondary approval from the SBA, essentially allowing you to skip step three in the list above. However, even with a preferred lender, SBA loans are slower to fund than other business loan types.
Frequently asked questions
Yes. While it can be more difficult to qualify for an SBA loan as a startup company, it’s not impossible.
In fiscal year 2025, most SBA loans went to businesses that had been in operation for two years or more. However, 15.2% of SBA 7(a) loans were given to businesses with less than two years in operation, while an additional 14.6% went to startups planning to use the loan funds to open their doors. The 504 program saw 14.4% of its approved loans going toward starting a new business, but only 2.1% going to existing businesses under two years old.
If your business doesn’t meet the criteria for an SBA loan, there are other types of small business financing you can consider. Alternative lenders tend to have more flexible eligibility requirements, including more relaxed time in business, annual revenue and credit score criteria.
However, these lenders tend to charge higher interest rates, and terms will likely be shorter than those SBA lenders have to offer. Still, an alternative business loan could be worthwhile if your business needs fast funds and you’re comfortable with the repayment schedule.
All SBA loans require a personal guarantee, which makes you personally liable for your business debt. By signing a personal guarantee, you give the lender permission to come after your personal assets, like your home or savings, to recoup their losses if you default on your loan.
If you’re having trouble keeping up with your SBA loan payments, contact your lender to find out more about your options. While not required, some lenders may be willing to work with you to figure out a new payment schedule — especially if default is the only alternative.
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