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Small Business Administration
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 the disaster loan program, SBA does not directly provide the actual business loan. Instead, SBA provides a partial guarantee that they will repay a percentage of the loan to the lender if a business defaults on the 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 conventional loans. By reducing the risk for lenders, the SBA helps encourage financial institutions to lend to small businesses. It is giving small business owners and start-up businesses peace of mind with business financing options, ultimately resulting in extra capital and cash flow.
How do SBA loans work?
Since SBA loans are bank loans, applications are submitted to the bank, and loan payments are paid to the bank. SBA’s involvement is limited to reviewing the loan application submitted by the bank and providing the bank with a written authorization outlining the conditions of the SBA guarantee.
How can I use SBA loan proceeds?
SBA offers several loan programs designed for small businesses that may not qualify for traditional bank or conventional loans. The most common SBA loan is the 7(a) General Business Loan Guaranty Program, which provides up to $5 million in working capital and is designed to help entrepreneurs or start-up businesses to 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 business debt.
SBA also offers these loans to help out small businesses:
- SBA export loans finance fixed assets and working capital for businesses that plan to start or continue exporting.
- CAPLine financing covers seasonal working capital.
- SBA 504 loans provide funding for assets like new equipment or real estate.
- SBA disaster loans are available to repair or replace items that have been damaged or destroyed in a declared disaster.
- Economic Injury Disaster loans (EIDL) provide economic relief to businesses and nonprofit organizations that are currently experiencing a temporary loss of revenue.
- The SBA Microloan Program, the smallest loan program, provides loans up to $50,000 to help small businesses start up and expand.
- SBA Express loans are a simple way to receive expedited, amortized government-guaranteed financing for your small business. Borrowers can be granted up to $350,000 of capital in the form of either a term loan or line of credit.
- The Preferred Lender Program (PLP) is an SBA program where certain lenders are designated as Preferred Lenders with the authority to approve SBA loans unilaterally. SBA generally provides a loan guarantee to these lenders within 24 hours of their request.
The amount of SBA funds you qualify for will vary based on how much working capital your business needs. The interest rate and repayment terms of your loan will depend on the actual SBA loan program you choose.
How can I get an SBA loan?
SBA financing programs vary depending on a borrower's needs. To apply for an SBA loan, you will need to collect personal and business information for your SBA loan application before visiting a participating lending institution. The lender will require borrowers to provide extensive documentation in the 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
The following assets can be used as collateral for an SBA loan guaranty:
- Fixed assets such as real estate/land and/or buildings
- Machinery and/or equipment
- Warehouse receipts for marketable merchandise
- Co-signer in the case you are not able to repay the loan
- Accounts receivable
- Business owner savings accounts
- Life insurance policies
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 business owners can receive funding from traditional lenders. The working capital you receive can be used to meet a variety of business needs.
However, the SBA loan program requires extensive time and documentation to receive approval. In addition to the time needed to track down statements for everything from your personal credit (including your credit score) and financial statements to your loan application history, the application and approval process can take up to three months.
Whether you need short-term loans or long-term financing, online lenders can be a better option to get working capital fast.
SBA loans can be used for a wide range of expenses. According to the SBA, you can use these loans for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory and real-estate purchases.
The requirements are the same for new and existing businesses:
- Acceptable personal and business credit
- For-profit business status
- U.S.-based location and operations
- Owner-supported and funded
- Exhausted other funding options
- Meet SBA size standards
- Be in an SBA-acceptable industry
- Owned by an eligible person
No, SBA loans are for business use only.
The SBA does not offer loans specifically through the Small Business Association. However, it does set loan guidelines for their partnering lenders and financial institution. You can visit their website for a list of partners, or you can apply with us. For more information regarding funding sources you can read this article.
Since you’re applying through a financial institution, your ability to apply online will be dependent on whether the institution you’re working with offers that capability.