SBA Loan Requirements: How to Get an SBA Loan
When you get an SBA loan, you are borrowing from an SBA-approved lender and your loan is partially guaranteed by the government. By backing these loans, the SBA is helping lenders to reduce their risk, which helps more business owners qualify for access to financing.
U.S. Small Business Administration (SBA) loans are popular for their relatively low interest rates, high loan amounts and flexible uses. But getting approved for an SBA loan can sometimes be more complex than getting approved for other types of financing.
SBA loan requirements for businesses
To be eligible for an SBA loan, your business will need to meet the following requirements.
1. Be a for-profit business that is officially registered and legally operating
First and foremost, your business will need to be registered with the appropriate governmental agencies. In most cases, this means registering your business with your state and local government, though registration requirements can vary based on your location and your business structure.
Keep in mind that with the exception of disaster relief, nonprofit organizations typically are not eligible for SBA loans. Your business must be operating legally for profit to be considered for a 504 or 7(a) loan.
2. Be physically located and operating in the US
Your business will need to be physically located and operated in the U.S. or its territories to qualify. It’s also important to note that if your business has international operations, the loan proceeds must be put toward your domestic operations specifically.
3. Have invested equity in the business
Depending on the loan type and amount, you may be required to contribute some of your own funds to the project. The SBA calls this an equity injection, but it may also be referred to as an SBA down payment.
Down payment requirements vary between SBA lenders. If the loan is being used for a complete change in ownership, a down payment of 10% or more will typically be required.
Outside of changes in ownership, the lender’s equity requirement must be consistent with its requirements for similarly sized commercial loans. Down payment requirements will also depend on the age, cash flow and creditworthiness of your business.
4. Meet the SBA’s size standards
SBA loans are intended for small businesses, which means your business must meet the size standards set by the SBA. Size standards vary by industry and are usually measured by average annual receipts or number of employees. For example, new car dealers cannot have more than 200 employees and meat retailers cannot earn more than $9 million per year.
To learn more about size requirements in your industry, check the SBA’s table of size standards.
5. Be able to repay the loan
You’ll need to be creditworthy and demonstrate a reasonable ability to repay your debt to qualify for an SBA loan. Credit requirements vary between SBA lenders, but lenders are instructed to align their SBA loan requirements with the requirements for similarly sized, non-SBA loans.
To assess your ability to potentially repay a loan, the SBA may consider your credit score and history, the cash flow of your business and the value of any assets you may be able to offer up as collateral.
6. Be unable to qualify for financing elsewhere
The federal government guarantees a portion of SBA loans to reduce lender risk, allowing them to offer financing to borrowers who may not have been eligible otherwise. This means that SBA loans are only available to borrowers who cannot qualify for a loan with reasonable terms from a non-federal, non-state and non-local government source.
To determine whether you meet this criteria, SBA lenders will look at your business from the eyes of a conventional lender, paying attention to how your business stacks up against traditional business loan requirements. For example, many lenders require businesses to be in operation for at least two years to qualify for a loan, so if your business has been operating for less time, that may tell the SBA why you can’t find affordable financing elsewhere.
7. Be creating new job opportunities
504 loan projects must be used to create new job opportunities or protect existing jobs that would otherwise be lost. In general, borrowers must create or retain at least one job for every $65,000 they receive, though specific requirements can vary by industry and location.
This isn’t a set rule, though – exceptions can be made if the CDC offering the loan has a portfolio that meets the SBA’s job creation thresholds and the project you’re applying for meets specific public policy goals, such as green energy goals that can qualify it as an Energy Public Policy Project.
If you’re applying for a 504 loan, talk with your lender to learn more about whether your project meets the 504 program requirements. If you’re applying for a 7(a) loan, this requirement won’t apply to you.
Some types of businesses are ineligible for SBA loans, such as:
- Real estate investment firms
- Firms involved in speculative activities (wildcatting for oil or trading commodities futures)
- Pyramid selling plans
- Gambling enterprises such as racetracks and casinos
- Charitable, religious or nonprofit organizations
- Dealers of rare coins or stamps
- Any business that is engaged in illegal activity or where the business owner is on parole
SBA loan requirements for business owners
As the business owner, you also are expected to meet certain requirements related to your managerial skills and personal integrity, including having:
- A solid business plan
- Necessary management expertise and commitment to succeed
- Proof you are a law-abiding person who has good character and a history of repaying debts
To learn more about the basic requirements for an SBA loan, read the SBA’s full terms, conditions and eligibility requirements before you apply.
SBA lender requirements
Small businesses not only have to meet the SBA’s requirements, but they also need to meet their lender’s requirements. SBA-approved lenders have the flexibility to decide which loan applicants to approve, but in general, SBA lenders will be taking a close look at:
- Time in business: If you have been in business for at least two to three years, you might be more likely to get approved. However, according to a LendingTree study, only 47% of businesses approved for SBA 7(a) loans in 2024 had been in business for more than two years.
- Business income: Be prepared to share your profit and loss statements.
- Business plan: Update your business plan before applying, including any recent developments to your business and financial projections.
- Personal financial history: Along with your business credit history, be prepared to share your personal income tax returns.
- Personal credit score: While the SBA doesn’t set a specific minimum credit score, some lenders might. Those with a personal FICO Score of 650 or higher may have a greater chance of being approved, but some types of SBA loans might have lower credit score requirements.
- Business credit score: The SBA screens prospective borrowers using the FICO Small Business Scoring Service (SBSS). The SBSS score is calculated based on data from business credit bureaus, consumer credit bureaus and other application data and borrower financial information.
Required documents
If you meet the SBA’s general criteria, you may need to provide basic documentation about you and your business. Not all of these documents and forms will be required for or apply to every applicant or program, but some of the most common items to include with your loan submission may include:
- Personal financial statement
- Current business income statement and balance sheet
- Federal income tax returns for the past three years
- Cash flow projections for two years
- Real estate purchase agreements (when buying real estate with SBA loan proceeds)
- Documentation of any lawsuits, judgments or bankruptcies
SBA loan rates and requirements by program
The interest rate for an SBA loan will be negotiated with the lender, but it cannot exceed the SBA’s maximum interest rate, which may depend on the term length, the loan amount and the prime rate — a rate that changes based on federal interest rates and overall market trends. The current prime rate is 7.50%.
Here’s a closer look at SBA loan rates and requirements by type of loan:
SBA loan programs
| Loan program | Maximum interest rates | Requirements | Fees |
|---|---|---|---|
| SBA 7(a) | Fixed rates: 12.50% to 15.50% 15.5% for loans $25,000 or less 14.5% for loans $25,001 to $50,000 13.5% for loans $50,001 to $250,000 12.5% for loans above $250,000 Some borrowers may qualify for lower rates. Based on the current prime rate of 7.50% + a rate maximum set by the SBA. Variable rates: 10.50% to 14.00% 14% for loans $50,000 or less 13.5% for loans $50,001 to $250,000 12% for loans $250,001 to $350,000 10.5% for loans above $350,000 Some borrowers may qualify for lower rates. Based on the current prime rate of 7.50% + a rate maximum set by the SBA. |
| One-time guaranty fee up to 3.50% |
| SBA Express | Same as 7(a) loans |
| Same as 7(a) loans |
| SBA 504/CDC | Varies; pegged to an increment above the 10-year treasury rate |
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| Microloans | Typically between 8.00% and 13.00% |
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Types of SBA loans
There are a few major types of SBA loan programs:
SBA 7(a) loans
The 7(a) loan program is the primary SBA loan program, and many people use the terms “SBA loans” and “7(a) loans” interchangeably. Most of the time, unless your business has some specific purpose or qualifies for a certain category of SBA loan, you will be applying for an SBA 7(a) loan. These loans can be used for almost any business purpose, including purchasing or improving property, refinancing business debt, investing in essential equipment and more.
Standard 7(a) loans have a maximum loan amount of $5 million and a maximum term of up to 25 years for real estate loans or equipment with a useful life exceeding 10 years. Most standard 7(a) loans for working capital have a term of up to 10 years. Interest rates may be fixed or variable.
Other types of 7(a) loans include:
- 7(a) Small Loan: Loan amounts up to $500,000, with no collateral required for loans of $50,000 or less. For loans over $50,000, lenders are allowed to set their own collateral requirements, but they must align with their collateral requirements for similarly sized, non-SBA loans.
- SBA Express: Loan amounts up to $500,000 with faster approval, typically within 36 hours. Collateral is not required for loans up to $50,000, but lenders may use their existing collateral policies for higher loan amounts.
CAPLines
Also a 7(a) program, CAPLines are loans up to $5,000,000 that help small businesses with short-term and cyclical working-capital needs. Maximum terms for CAPLines are up to 10 years with the exception of the Builders program. The four lines are:
- Seasonal CAPLine: Finance seasonal increases in receivables, inventory or labor costs.
- Contract CAPLine: Finance labor and material costs for assignable contracts.
- Builders CAPLine: Designed for small construction companies, general contractors and builders.
- Working CAPLine: Capital typically used by companies that provide credit to other businesses and that repay their CAPLine by converting short-term assets to cash.
Disaster assistance
The SBA also offers low-interest disaster assistance loans to help businesses recover from declared natural disasters. If your business is in an affected area, you can apply for SBA disaster loans.
SBA 504/CDC loans
SBA 504 loans are part of a specialized loan program where the SBA works with approved private lenders and private nonprofit corporations, called Certified Development Companies (CDCs), to provide long-term loans of up to $5,500,000. But 504 loans can typically only be used for major investments like real estate and heavy equipment purchases, and the loan funds must be used to drive business growth and job creation. This means that the way you plan to use the loan will impact your ability to qualify for it.
Interest rates for 504 loans are fixed but will vary since they are correlated with the current market rate for 10-year U.S. Treasury bonds.
Microloans
SBA microloans are issued through nonprofit lenders and have a maximum loan amount of $50,000. These loans cannot be used for real estate and have a maximum term of seven years.
How to apply for an SBA loan
Now that you understand SBA loan requirements, you’re ready to apply. You can use the SBA Lender Match tool, browse the list of the 100 most active SBA 7(a) lenders or check out our list of the best SBA lenders to find a lender to work with.
To apply for an SBA loan, you’ll need to fill out SBA Form 1919, which collects information about you, your business and your funding request. If your business has multiple owners, each co-borrower will need to complete a separate form. You’ll also need to provide any additional documentation required by your lender.
If you want to learn more about how to choose an SBA lender or how to understand the SBA loan approval process, consider reaching out for advice from a local Small Business Development Center, SCORE business mentor or SBA District Office. They can help you understand your options for SBA loans.
The SBA loan process might seem complicated and time-consuming, but the benefits can be worth the effort. Understanding the SBA loan requirements upfront can help you have an informed conversation with your SBA lender and make the right choice for your business.
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