types of loans / Secured Small Business Loans /
SBA Loans and Programs
Small Business Administration (SBA) loans are offered through financial institutions approved by SBA and are guaranteed in part by the U.S. Small Business Administration.
What is an SBA Loan?
The Small Business Administration (SBA) collaborates with select commercial lenders that agree to meet SBA guidelines to offer small business loans.
With the exception of their disaster loan program, SBA does not directly provide the actual business loan. Rather, SBA provides a partial guarantee that they will repay a certain amount to the lender if a business defaults on its loan payments.
Essentially, the SBA acts as a co-signer for small businesses that may not have the credit history or other collateral to receive a traditional loan. By reducing risk for lenders, SBA helps encourage financial institutions to lend to small businesses.
How can I use an SBA loan?
SBA offers a number of loan programs designed for small businesses that may not qualify for traditional bank loans. The most common SBA loan is the 7(a) loan, which provides up to $5 million in working capital and is designed to help entrepreneurs start or expand their businesses. It's the most flexible loan option and can cover a variety of business expenses, including short- and long-term working capital and refinancing existing debt.
SBA also offers export-assistance loans, CAPLine financing for seasonal working capital or CDC/504 loans, which provide funding for assets like new equipment or real estate. Disaster loans are available to repair or replace items that have been damaged or destroyed in a declared disaster. Other types of loans, such as microloans or the SBA Express program, offer different levels of funding that vary by how much working capital your business needs.
How can I get an SBA loan?
To apply for an SBA loan, you will need to collect personal and business information for your application before visiting a participating lending institution. The lender will require you to provide extensive documentation in your loan package, including:
- Personal background and financial statements
- Résumés for each principal
- Business financial statements
- Profit and loss statements
- Income tax returns
- Loan application history
- Projected financial statements
- Ownership and affiliations
- Business certificate/license
- Business overview and history
- Business lease
Once your loan package is complete, your lender will submit it to SBA for review.
Is an SBA loan the right fit for my business?
SBA backing increases the likelihood that small businesses can receive funding from traditional lenders. The working capital you receive can be used to meet a variety of business needs.
However, SBA loans require extensive time and documentation to receive approval. In addition to the time required to track down statements for everything from your personal finances to your loan application history, the application and approval process can take up to three months.
Online lenders like Kabbage can be a better option for getting working capital fast. Because our application process is fully automated and online, we can quickly provide small business loans of up to $250,000. We use simple, meaningful revenue data to approve your business – not elaborate documentation that takes you extensive time to gather.
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