Financing Guide
SBA Loans
Reviewed and updated 2026-05-23 · Figures are dated SBA and industry references, not offers of credit
SBA loans are bank loans partially guaranteed by the U.S. Small Business Administration, offering lower rates and longer terms than conventional financing to qualifying small businesses. The SBA itself does not lend directly in most cases; banks and non-bank lenders make the loans, and the SBA guarantees a portion — generally 85% on loans of $150,000 or less; 75% on loans over $150,000. That guaranty is what lets lenders extend longer terms and lower rates than they would on a conventional loan of the same risk. The tradeoff is time: standard SBA loans take typically 60 to 90 days from application to funding for standard 7(a) and 504 loans.
How SBA loans actually work
The Small Business Administration is a federal agency, but it is not the bank. With one narrow exception — SBA disaster loans — the SBA does not write checks to small businesses. It signs partial guarantees on loans that banks and approved non-bank lenders originate, underwrite, and service. Most SBA loans are made under one of three programs:
SBA 7(a) — the flagship general-purpose program
7(a) is by far the largest SBA program. It can fund working capital, equipment, business acquisition, partner buyouts, owner-occupied real estate, and (under specific rules) refinancing of higher-cost debt. Loan size caps at $5 million. Terms run up to 10 years for working capital and equipment, up to 25 years for real estate. The SBA publishes a maximum allowable variable rate of variable rates capped at prime + 3.0% to 6.5% depending on loan size and term; lenders frequently price below the cap on stronger credits.
SBA 504 — for major fixed assets
The 504 program is purpose-built for owner-occupied commercial real estate and large equipment. Its structure is unusual and worth understanding: 50% conventional bank loan, 40% cdc debenture (sba-guaranteed), 10% borrower equity. The 40% CDC piece carries a long-term fixed rate set at debenture pricing — historically one of the most competitive long-term fixed rates a small business can access. Borrower equity is typically 10%, sometimes 15% for special-use property or start-ups.
SBA Express — faster, smaller, less guaranty
SBA Express trades guaranty for speed. The SBA itself responds in roughly 36 hours, and loans cap at $500,000. The guaranty drops to 50%, which means lenders carry more of the risk and underwrite accordingly — Express tends to fund stronger credits, not marginal ones. Total time to fund is still measured in weeks, not days.
What an SBA loan costs
SBA loan pricing has three pieces: an interest rate (almost always variable for 7(a), almost always fixed for the 504 CDC portion), SBA guaranty fees, and the lender’s own packaging fees. The guaranty fee is set by SBA on a sliding scale and tied to loan size — small loans currently carry a 0% fee under SBA fee-relief policy, while larger loans pay a tiered percentage of the guaranteed portion. Lender packaging fees vary; ask for them in writing before signing a term sheet.
Comparing an SBA quote to a conventional bank loan or a non-bank product almost always favors the SBA option on rate and term, provided you can wait for it. That conditional is the whole game with SBA financing.
A worked example
A $1,000,000 7(a) loan over 10 years at Prime + 2.75% (a typical real-world price, below the SBA-allowed cap) amortizes to a predictable monthly payment, with the rate adjusting quarterly as prime moves. The same business approaching a merchant cash advance for $1,000,000 in capital would repay closer to $1,300,000 over roughly 12 months — the same dollars, faster, at multiples of the cost. The SBA loan is dramatically cheaper. It also takes two to three months instead of two to three days. Both statements are always true together.
Who an SBA loan fits
- Established businesses (typically 2+ years operating) seeking the lowest available cost of business debt
- Owner-occupied commercial real estate purchases, where the 504 program shines
- Acquisitions, expansions, equipment purchases, and refinancing of higher-cost debt when speed is not critical
- Borrowers who cannot access conventional bank credit on reasonable terms but are otherwise creditworthy
Qualification, in plain terms
SBA loans are bank loans first and SBA loans second. The lender underwrites you the way it underwrites any commercial credit: cash flow that services the debt, a business at least roughly two years old, a credible use of funds, and personal credit that does not raise red flags. Typical preferred-lender credit floor is most sba lenders look for a personal fico of 680 or higher; many require 700+. A personal guarantee is required from every owner of 20% or more — this is non-negotiable. Collateral is generally required on loans over $25,000, taken to the extent available; SBA will not decline a loan solely for under-collateralization if cash flow is strong.
When an SBA loan is the wrong choice
SBA financing is the lowest-cost option for businesses that qualify — but it is the wrong tool when:
- Capital is needed in days or weeks — SBA underwriting is routinely measured in months
- The business is brand new or has serious credit issues; SBA still requires a lender to underwrite it like a bank loan
- Any owner of 20% or more is unwilling to provide a personal guarantee — SBA requires it
- The intended use of funds does not match SBA's eligible-use rules (e.g., passive real estate investment, speculation, or refinancing certain ineligible debt)
How PMF fits in
Premium Merchant Funding, which publishes this site, works with SBA preferred lenders and packages SBA loan applications for business owners who fit the profile. If an SBA loan is the right answer, that is what we will tell you — and if you need capital faster than SBA timing allows, this guide explains the alternatives in their own sections. The point of writing this is to put a borrower in the right product, not the most expensive one.