Your business must meet several key criteria to qualify for an SBA loan in 2025. This includes having good personal credit as the business owner, operating within the U.S. or its territories, demonstrating a need for financing that can’t be met through traditional sources, and, in some cases, providing collateral to secure the loan.
The best lenders offer SBA loans are financing that the Small Business Administration guarantees, making it easier for businesses to obtain loans from third-party lenders. While the SBA doesn’t lend money to businesses directly, it backs a portion of each SBA-approved loan, reducing the risk for lenders and increasing access to business funding.1
Key Takeaways
- To qualify for an SBA loan in 2024 you must have good personal credit, the business must operate within the U.S. or its territories, and you must show a need for financing that can’t be met through traditional sources. You also may be required to put up collateral.
- SBA loans are often used for seasonal financing needs, refinancing business debt, and purchasing assets like real estate, machinery, and equipment.
- The SBA has a number of different loan types, which generally vary in the amount you can borrow, how they work, and how quickly you can get one.
- Alternatives to SBA loans include business loans from banks or credit unions, business grants, and business credit cards.
How to Qualify for an SBA Loan
Here are the general requirements to qualify for SBA loans:2
- Meet various SBA requirements, such as that your business is for-profit, physically located and operates in the U.S. or its territories, and meets the SBA’s definition of a small business, which varies by industry.
- Demonstrate that you cannot secure financing from traditional sources, such as commercial bank loans or lines of credit.
- Generally, the business owner needs to have a credit score in the 600s, depending on the lender and type of loan.
- The loan must be used for an approved purpose, such as working capital or equipment purchases.
- You must have a clean criminal record, and typically, you must not owe money to the federal government.
- You may need to provide collateral in some cases. For instance, loans exceeding $350,000 used to acquire real estate, equipment, or inventory typically require collateral.3
- Your business must operate in an eligible industry. Ineligible industries include financial businesses, life insurance companies, and government-owned entities.
What Can SBA Loans Be Used For?
SBA loans can be used for most business purposes, including long-term fixed assets and operating capital. Common uses include seasonal financing needs, refinancing business debt, and purchasing assets like real estate, machinery, and equipment.4
They’re generally best suited for meeting long-term rather than short-term business needs. This is particularly true for entrepreneurs who can’t get approved for traditional lending products and want to avoid higher-interest options like credit cards.
- SBA-imposed cap on interest rates
- Interest rates below national average for credit cards
- Potential to borrow up to $5.5 million (SBA 504 Loan Program)
- Repayment terms up to 25 years
- SBA guarantee of at least 50% of loan if borrower defaults
- Generally rigorous application process
- Inconsistent requirements among SBA lenders
- Rejection of most SBA loan applications
- Potential collateral requirement
- Possible requirement for personal guarantee of loan
Be sure to shop around for the best SBA loan deal. You may be able to negotiate a loan’s interest rate, payoff period, and fees. To find an SBA-approved lender, use the agency’s Lender Match tool.
When Is It a Good Idea to Get an SBA Loan?
Whether an SBA loan is right for you depends on your business’s specific needs. If you’re unable to secure financing from traditional sources, like banks, due to limited credit history, lower credit scores, or a lack of collateral, an SBA loan might be a strong option.
The most common type of SBA 7(a) loan is often a good choice when expanding your business. This could include purchasing new equipment, buying inventory, or funding other business expenses expected to drive growth.
SBA loans are also useful for addressing working capital needs. They can provide funds to cover operational costs like payroll, inventory, or marketing, helping you manage cash flow shortfalls.
SBA Loan Types
Standard 7(a) Loan
SBA 7(a) loans can be used for various purposes, such as expanding a business, buying real estate, refinancing debt, or purchasing equipment. These loans are popular due to their attractive interest rates and low down payment requirements.
The maximum amount for a standard 7(a) loan is $5 million. SBA guarantees a standard 7(a) loan at 85% for amounts up to $150,000 and 75% for amounts greater than $150,000.1
7(a) Small Loan
The 7(a) small loan is a sibling of the standard 7(a) loan. The primary difference with a 7(a) small loan is that you can only borrow up to $500,000.5 Proceeds can be earmarked for the same purposes as a standard (7a) loan, including working capital, purchasing equipment, and refinancing debt.
SBA guarantees a 7(a) small loan at 85% for amounts up to $150,000 and 75% for amounts greater than $150,000.1
SBA Express
SBA Express loans, part of the SBA’s 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans have payoff periods of up to 25 years for real estate purchases or 10 years for working capital, equipment, and inventory purchases.6 They can also be used as a line of credit.
The maximum amount for an SBA Express loan is $500,000. SBA guarantees 50% of an Express loan.
Export Express
SBA’s Export Express offers up to $500,000 in guaranteed loans or revolving lines of credit. It features a streamlined process similar to SBA Express but with higher guarantees—90% for loans up to $350,000 and 75% for larger loans. Interest rates are negotiable within SBA limits, and collateral requirements are flexible.7
Export Working Capital
SBA’s Export Working Capital provides loans to businesses that generate export sales and need additional working capital to support these activities. Loans can go up to $5 million, with the SBA guaranteeing 90% of the loan, and revolving lines of credit have terms of up to 36 months.5
CAPLines
This program is designed to help small businesses meet their short-term and cyclical working capital needs by offering four different types of credit lines. The loans generally have a maximum maturity of 10 years, except for Builders CAPLine loans, which can’t exceed 60 months plus the time needed to complete the construction or rehabilitation.5
SBA Microloans
SBA microloans are designed to help small businesses and some nonprofit childcare centers rebuild, reopen, repair, or improve their operations. They’re geared toward entrepreneurs such as veterans, women, minorities, and startup founders, and those with lower credit scores. Microloans can be used for working capital, supplies, furniture, and equipment.
The maximum loan amount is $50,000, with the average loan being around $13,000. Interest rates typically range from 8% to 13%, and the maximum repayment term is six years.8
International Trade Loan
This program offers SBA-backed loans of up to $5 million to help small businesses compete in global markets. The loans can be used to purchase or upgrade facilities and equipment in the U.S., develop foreign markets, and provide working capital for export activities. The SBA guarantees up to 90% of the loan, with interest rates negotiated between the lender and borrower. Credit decisions typically take five to 10 business days.9
504 Loans
504 loans are provided through SBA-licensed certified development corporations (CDCs). The maximum amount available is either $5 million or $5.5 million, depending on the type of business or project.
Proceeds from a 504 loan can go toward real estate, heavy equipment, and other fixed assets.