SBA Loan Complete Guide

What is the difference between an SBA loan and a traditional bank loan?

SBA loans are partially guaranteed by the Small Business Administration, which reduces risk for lenders and often results in lower interest rates and longer repayment terms. Traditional bank loans have no government backing but may fund faster. SBA loans typically take 30-90 days to close versus 1-3 weeks for conventional bank loans.

What is an SBA 7(a) loan and how does it work?

The SBA 7(a) is the Small Business Administration's most common loan program. The SBA doesn't lend directly — it guarantees 75-85% of loans made by approved lenders, reducing lender risk and enabling better terms for borrowers. Loan amounts up to $5 million, terms up to 10 years for working capital (25 years for real estate), and rates typically WSJ Prime + 2.75-4.75%.

What is an SBA 504 loan?

The SBA 504 loan funds fixed assets: commercial real estate, heavy equipment, and major renovations. It works through a three-way split: the lender provides 50%, a Certified Development Company (CDC) provides 40% (SBA-guaranteed), and you put down 10%. Maximum 504 loan size is $5.5 million. The structure allows 10-25 year terms at below-market rates for business owners who want to build equity in property.

What is the SBA Microloan program?

The SBA Microloan program provides loans up to $50,000 (average $13,000) through nonprofit intermediary lenders. It's designed for startups, newer businesses, and businesses in underserved communities that don't qualify for traditional bank loans. Terms up to 6 years, rates typically 8-13%. Many intermediaries also provide business training and technical assistance alongside the capital.