If you’re starting or growing your small business, you should learn about loans guaranteed by the U.S. Small Business Administration (SBA) as a funding option.
If you apply for an SBA loan, your loan won’t be from the SBA, and you won’t make your payments to the agency. Instead, the SBA approves lenders to provide loans to small businesses under their loan programs.
This eguide is designed to give you an overview of the SBA loan programs to help you decide if an SBA loan may be right for your business.
Why are SBA loans popular?
SBA loan terms are often among the most attractive loans available to small business owners. They typically offer:
- Low rates
- Longer terms
- Reasonable fees
- Small down payments
Additionally, the SBA offers resources such as counseling and training through partner organizations such as SCORE, where mentors can help guide you to success.
Is your business eligible for an SBA loan?
To qualify for an SBA loan often takes a fair amount of effort. Keep in mind, the SBA sets minimum requirements but lenders may have additional requirements.
To be eligible for funding, your business must:
- Be for-profit, and located in the United States
- Qualify as a small business based on the number of employees, revenue, and your company’s net worth, which varies by industry. Use the SBA’s free Size Standards Tool at SBA.gov/size-standards to see if your business qualifies
- Demonstrate the need for credit and the ability to pay back the loan
- Show an inability to get similar funding from other sources
Certain types of businesses are ineligible for loans. Companies primarily involved in lending, gambling, politics or lobbying, or pyramid schemes, for example, are among the types of businesses that are generally ineligible for SBA loans. The SBA website offers a complete list of ineligible businesses.
The SBA does not have minimum revenue requirements but the applicant must be able to demonstrate the ability to repay the loan. Some SBA loans may be available to startups.
If you don’t qualify for an SBA loan from one lender, that doesn’t necessarily mean you can’t qualify with a different lender. Review the reasons you were denied, and talk to the lender to help you understand whether those are due to SBA guidelines, or additional requirements imposed by the lender.
Download “Is an SBA Loan Right for You? The Quick Guide” to learn more about the SBA loan programs.
Please keep in mind that program requirements, fees, interest rates, and other key components may change.
For the most up-to-date information and help with your business, talk with an approved lender or visit the SBA website at SBA.gov.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.