What’s an SBA Loan?

An SBA loan is a small business loan that is partially guaranteed by the government (the Small Business Administration), which eliminates some of the risk for the financial institution who is issuing the loan.

That’s right. It’s not the SBA who is doing the lending. The SBA works with a network of approved financial institutions (typically, traditional banks) that lend money to small businesses more frequently and with better terms because the SBA partially guarantees the loans that these lenders extend to small businesses.

This means that they will back up a part of the loan that a small business receives, so if you’re unable to pay back your SBA loan, the lender know that the SBA will cover the portion that they guaranteed.

Without this partial guarantee—which can cover up to 85% of a loan’s amount, traditional banks will often consider lending to small businesses “too risky.” As such, small business who don’t secure loans guaranteed by the SBA often qualify for less-than-ideal terms, if they’re even able to qualify for a bank loan at all.

However, because SBA loans involve a government entity, their application process is notoriously thorough and often restrictive. If you’re hoping to apply for an SBA loan, you’ll need to prepare a lot of documentation and even more patience.

What Terms Does an SBA Loan Offer?

Depending on your business’s qualifications and which lender you choose to work with, the terms you’ll be able to access with an SBA loan will vary.

Just like any other type of loan, SBA loans come in all shapes and sizes.

SBA loans can range in size anywhere from $500 to $5.5 million and can offer APR’s as low as 6.5%. Additionally, repayment terms for SBA loans can range from 5 to 25 years, but 10 years is a standard SBA loan repayment term length.

With all that said, even at their quickest, you can only fund your small business with an SBA loan if you have at least 3 weeks to spare. Bureaucracy and paperwork can really gum up a process, and if your business needs cash quick, then an SBA loan isn’t a feasible option.

Can I Get an SBA Loan?

SBA loans are pretty difficult to qualify for, but they come with some general minimum requirements that can help you understand if your small business is in the running for this sought-after source of funding.

If your business fulfills the following minimum requirements, then you should seriously consider applying for SBA funding:

• 2+ years of business history under your belt
• A 640+ personal credit score for the business owner
• $100,000+ in annual revenue for your business

If you fulfill these minimum requirements, the answer to “can I get an SBA loan?” isn’t necessarily an automatic “yes.” It’s more like a “it’s possible”, as many different things can affect your loan eligibility.

The answer to that question will only be a concrete “yes” once you have an SBA loan in your business’s bank account.

The Bottom Line on SBA Loans

With all of our bases covered, it’s time to take a step back and look at the bottom line for this small business funding option. What have we learned from all of these details on SBA loans?

With some of the highest loan amounts, the longest repayment terms, and the lowest APR’s available to small businesses, SBA loans are the undisputed champion of small business loans. If you can qualify for an SBA loan, then you should almost certainly consider it your very best option for business financing.

That said, they’re not necessarily a realistic funding choice for many small businesses. Some businesses will have to seek funding elsewhere, whether it be a traditional term loan, an asset-backed loan, or any of the many other, more accessible loan types. 

If you don’t qualify for an SBA loan today, though, that doesn’t mean you’ll never be able to qualify for one.



If you improve your personal credit, get more business history under your belt, and grow your business’s annual revenue, then you can graduate to an SBA loan in the future.