SBA Loans

SBA loan is simply a small business loan that is partially guaranteed by the US government’s Small Business Administration (SBA). The SBA loan eliminates some of the risks for the financial institution that is issuing the loan. SBA-guaranteed loans are made by a private lender and guaranteed partially by the SBA, which helps reduce the lender’s risk and helps the lender provide financing that’s otherwise unavailable at reasonable terms. There are three parties involved in an SBA loan transaction, they are:
  • The borrower who borrows money under the SBA loan scheme
  • The SBA, provide a substantial portion of the guarantee to the lender on behalf of the borrower.
  • The lender lends the money to the borrower based on a guarantee by the SBA.
The U.S. Small Business Administration (SBA) partners with lenders to help business owners access the financing they need. SBA loans are attractive for their generous amounts, affordable interest rates and long repayment terms. And while the Paycheck Protection Program (PPP) program is now closed, the SBA’s flagship 7(a) and 504/CDC loan programs are still accepting applications. Keep in mind that the SBA loan doesn’t issue the loans directly — rather, SBA-authorized institutions facilitate the loan process.

SBA Loan Requirements

SBA loan requirements can vary depending on the loan program you select and the lender you apply with. However, some eligibility requirements are standard for all SBA loan applicants:
  • You must be an officially registered for-profit business
  • Your business must be physically located and operating in the U.S. or its territories
  • The business owner must have invested their own equity (time or money) in the enterprise
  • You can’t obtain business funding from another lender
  • The business must meet the SBA’s definition of a small business
Keep in mind that the SBA loan requirements are a little different for each program. For example, SBA’s 504 loans can’t be used for working capital, and its microloans can’t be used for real estate purchases. So, make sure you apply for a loan that matches your financing needs.