The basic path to an SBA loan

You apply through a bank or credit union, not directly to the Small Business Administration. The SBA doesn't lend money itself — it guarantees loans that private lenders make, which means the lender takes less risk and can offer better terms than they would otherwise. Your lender handles the paperwork, submits it to the SBA for approval, and if the SBA backs the loan, the bank funds it.

The process typically takes four to six weeks from application to funding, though it can be faster or slower depending on how complete your paperwork is and how busy the SBA is. You'll need a business plan, personal financial statements, tax returns, and proof that you've been turned down by conventional lenders or that an SBA loan is the right fit for your situation.

Key Takeaways

  • You apply for an SBA loan through a bank or credit union that participates in SBA lending programs, not through the SBA directly.
  • The SBA guarantees the loan, meaning it promises to cover a portion of the loss if you default, so the lender can offer better rates and terms.
  • You'll need to provide business financials, personal tax returns, a business plan, and proof of how you'll use the money.
  • Most SBA loans require you to show that conventional financing isn't available to you, though some programs have different rules.
  • Approval typically takes four to six weeks, and the lender funds the loan once the SBA approves it.

Finding a lender that does SBA loans

Not every bank offers SBA loans, and not every bank that does is equally experienced with them. Start with your current bank — if you have a relationship there, they may be more willing to work with you. If they don't do SBA lending, ask them to refer you to one that does.

The SBA maintains a searchable directory of lenders on its website, organized by state and by loan program. You can also contact your local Small Business Development Center (SBDC) or SCORE chapter — both are free resources that help small business owners and can point you to lenders in your area who actively make SBA loans. Lenders who specialize in SBA lending move faster and know the paperwork better than those who do it occasionally.

What documents you'll need to gather

Before you call a lender, collect your personal and business financial records. You'll need your personal tax returns for the last two years, your business tax returns for the last two years (if your business has been operating that long), and current business financial statements — a profit and loss statement and a balance sheet. If you're a new business, you'll need a projected income statement instead.

You'll also need a business plan that explains what your business does, who your customers are, and how you'll use the loan money. This doesn't have to be a 50-page document — a clear, honest explanation of your business and your plan is enough. Bring a copy of your business license, proof of ownership, and a personal financial statement that lists your assets and debts. If you own real estate or other collateral, bring documentation of that too.

The lender will ask for proof that you've been denied conventional financing or that an SBA loan is necessary for your situation. This might be a letter from another bank saying they won't lend to you, or it might be a simple statement that you're seeking an SBA loan because the terms are better suited to your business. Different lenders interpret this requirement differently, so ask upfront what they need.

How the SBA loan programs differ

The most common SBA loan is the 7(a) loan program, which can be used for almost any business purpose — working capital, equipment, real estate, or refinancing existing debt. Loans can go up to $5 million, though most are smaller. The SBA guarantees up to 90 percent of the loan amount, which is why lenders are willing to make them.

The 504 loan program is designed specifically for buying real estate or equipment. It works differently: you get a loan from a bank for part of the cost, and a certified development company (CDC) provides a second loan for the rest. This structure is useful if you're buying a building or expensive machinery and want to spread the payments over a longer term.

The Microloan program is for businesses that need smaller amounts — up to $50,000. These loans are made through nonprofit intermediaries rather than banks, and the process is faster and less formal. If you're just starting out or need a small amount to get going, this might be your route.

Each program has different rules about what you can use the money for, how long you have to repay it, and what the interest rate will be. Your lender can tell you which program makes sense for your situation.

What happens during the application review

Once you submit your application, the lender reviews it first. They're looking at whether your business can repay the loan, whether you have skin in the game (usually you need to put in 20 to 25 percent of the project cost yourself), and whether the loan purpose makes sense. If the lender thinks it's a good fit, they submit it to the SBA.

The SBA reviews the application to make sure it meets their rules — that you're a real business, that you haven't been denied an SBA loan before for fraud or default, and that the loan purpose is allowed. They also verify your credit and background. This review usually takes two to four weeks. If the SBA approves it, they issue a loan authorization number, and the lender funds the loan.

If the SBA denies the application, the lender will tell you why. Common reasons include insufficient collateral, poor credit, or a business plan that doesn't look viable. You can ask the lender to resubmit with additional information, or you can apply through a different lender.

Collateral and personal guarantees

Most SBA loans require collateral — something the lender can take if you don't repay. For a 7(a) loan, the collateral is usually the asset you're buying with the money. If you're buying equipment, the equipment is collateral. If you're buying a building, the building is collateral. The lender will also want a personal may provide, which means you're personally responsible for repaying the loan if your business can't.

For a 504 loan, the real estate or equipment you're buying is the collateral, and you'll usually give a personal may provide as well. The lender will order an appraisal to make sure the collateral is worth enough to cover the loan amount.

If you don't have collateral or your collateral isn't worth enough, you may still be able to get the loan, but the interest rate will be higher and the lender may require you to put more of your own money into the project.

After your loan is approved and funded

Once the lender funds the loan, the money goes into a business account you control. You can then use it for the purpose stated in your application. The lender will send you a promissory note and loan agreement that spell out the repayment terms, interest rate, and what happens if you miss a payment.

You'll make monthly payments to the lender starting either immediately or after a grace period, depending on your loan terms. The SBA doesn't collect payments — your lender does. If you run into trouble making payments, contact your lender immediately. Many lenders will work with you on a temporary payment reduction or deferment rather than let the loan go into default.

Keep good records of how you use the loan money. The SBA can audit loans at any time, and if the money was used for something other than what you said in your application, you could be required to repay the entire loan immediately.

Frequently Asked Questions

Do I have to be turned down by a regular bank before I can get an SBA loan?

Most SBA programs require that you show you can't get conventional financing, but this doesn't always mean you need a written rejection letter. Many lenders accept a statement that you're seeking an SBA loan because the terms are better for your business. Ask your lender what they need — some are stricter about this than others.

What credit score do I need for an SBA loan?

There's no official minimum credit score set by the SBA, but most lenders want to see a score of at least 620 to 640. If your score is lower, you may still be able to get a loan, but the interest rate will be higher and you may need to put more of your own money into the project. Some lenders specialize in lower-credit borrowers.

How much of my own money do I need to put in?

Most SBA lenders require you to invest 20 to 25 percent of the project cost yourself. For a $100,000 project, you'd need to put in $20,000 to $25,000. This shows the lender that you have skin in the game and are committed to making the business work.

Can I use an SBA loan to pay off credit card debt or other personal debts?

No. SBA loans must be used for a legitimate business purpose — buying equipment, real estate, inventory, or working capital. You can't use the money to pay personal debts or credit cards, and if you do, the SBA can require you to repay the entire loan immediately.

What if I can't find a lender willing to work with me?

Contact your local Small Business Development Center or SCORE chapter. They can help you strengthen your application, connect you with lenders who work with borrowers in your situation, and sometimes they know of alternative funding sources. Some nonprofit lenders also make SBA loans and may have different standards than banks.