types of loans / Secured Small Business Loans /
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 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 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. The actual cost and repayment terms of Small Business Administration loans depends on the loan program you choose.
How can I get an SBA loan?
SBA business 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 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, 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 like Kabbage can be a better option to get working capital fast. Because our loan 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. Let us be your preferred lender.