SBA 7a Loan
Funding of real estate purchases
Helps refinance previous business debt
Short and long-term working capital
Run a for-profit business
Be a small business
Be in business within the U.S.
Use personal savings before getting help from the SBA
Demonstrate a need for a loan
Use the funds for a sound business purpose
Maximum Loan
$5 million
Borrowing limits up to $5 million
Competitive interest rates
Long loan terms available
Many industries are eligible
Must use personal savings before applying for the loan
Collateral is often needed
You need good credit
SBA Microloan
Working capital
Furniture and fixtures
Machinery and equipment
Varies by lender
Maximum Loan
Quick turnaround times
Many industries qualify
There are lower credit options
Low credit borrowers won’t qualify
Loan amounts only go up to $50,000
SBA Express Loan
Fast financing for business purchases
Varies by lender
Maximum Loan
Fast turnaround time
Low interest rates available
No collateral needed for small loans
Long repayment terms available
Good credit needed
May be restrictions on how you spend your money
Collateral is needed for large loans
SBA 504 Loan
Purchase or construct new or existing facilities
Purchase equipment and improve existing facilities
Operate a for-profit company
Have a net worth of less than $15 million
Have an average income of less than $5 million
Maximum Loan
$5 million
Most qualify for funding
Long loan lengths and amounts
Fixed-rate loans
Long application
High wait-times for loan approvals
SBA Community Advantage Loan
New business needs
Low-to-moderate income community
Empowerment zones and enterprise communities (EZ/EC)
Historically underutilized business zones (HUBZones)
A promise or opportunity zone, or a rural area
Maximum Loan
Help underserved communities
Collateral not required for small loans
Loan amounts up to $350,000
Higher credit needed
Very specific requirements you must meet
Lengthy application process
SBA Investment Program
Working capital for your business
51% of your employees and assets must be based within the U.S.
Be a small business
NOT to be in industries like farming, real estate, and financing
Maximum Loan
$10 million
High loan amounts up to $10 million
Fewer qualifications required
Not meant for startups
You’ll share ownership in your business
Farming, real estate, and finance won’t qualify

How to Apply for an SBA Startup Loan

Applying for an SBA Loan will be a similar process to other large loan options. You’ll need to dedicate some time to the process, especially if you want to get the best terms possible. Here’s every step you’ll encounter during the process. 

Calculate Startup Costs

Before you ever start looking for lenders, you’ll need to come up with a realistic total of what you’ll need to borrow. There’s no need to take out a huge loan just to have the money on hand. You’ll just end up paying extra for it (in interest) later. When calculating costs, make sure to consider the cost of:

  • Any property you need to rent/buy 
  • Any renovations you’ll need to do to that property 
  • Equipment you need to purchase
  • License fees (business, liquor, food, etc.)
  • Inventory to create your products 
  • Marketing, including ads and websites, to get the word of your business out 
  • Office furniture
  • Utilities to keep your business running 
  • Payroll for any employees
  • Insurance needs
  • Taxes, since many businesses are subject to corporate taxes 

This is a fairly comprehensive list, but make sure to consider any extra costs specific to your industry as well.

Develop a Business Plan  

Lenders will want to see your full business plan. They’re lending you, often, very large amounts of money and want assurance that you’ll pay it back. A business plan shows them your path to success and how long it might be until you see a profit. In your business plan, include the following:

  • Description(s) of your startup costs and how you plan to use funding. 
  • Describe your business and the products and/or services you provide. 
  • Your goals as a business. 
  • Your marketing plan. 
  • Descriptions of how much of your personal assets are going into your business. 

Research Your Loan Options

The SBA offers a number of different types of loans. Your next step is to research each of these options (we’ve provided descriptions above) and decide which one is right for you. Start with the loan amounts each offers. If you need a larger loan, stick with options like the SBA 504 and SBA 7(a) that offer millions. From there, consider collateral and credit requirements and how fast the funding is. 

SBA Startup Loan

Select the Right SBA Lender

Once you understand the type of SBA loan you need, you’ll need to narrow down your lender choices. Many lenders offer SBA loans, so the options are vast. Luckily the SBA has a Lender Match tool that can help pair you with options closest to what you’re looking for.

In general, you’ll have a couple of lender types to go with. These can include:

  • Online lenders: Online lenders that offer SBA loans will offer shorter turnaround times and some may have more relaxed requirements. In exchange, you may have to put up collateral. 
  • Banks: Most big-name banks offer SBA financing in some capacity. If you already work with one of these banks, using them could potentially help speed up the process, since much of your financial info is already in their system. 
  • Credit unions: Local credit unions tend to offer SBA Loans. While the application process may be longer, the perk of working with a local credit union is that they already know you as a banker. You can more easily argue your case, and many credit unions are more lenient on credit requirements. 

Prepare the Required Documentation

When you’ve selected your final lender, before you go through the application process, you’ll need to gather a lot of paperwork. The exact paperwork you need will vary from lender to lender, but generally, you should be prepared to present the following:

  • Your business plan.
  • Personal and business tax returns. 
  • Financial projections for the business you’re funding. 
  • Collateral options, if applicable. 
  • Copies of business licenses you’ve already acquired. 
  • Explanations of how you’ll use financing. 

Complete and Submit Your Loan Application

If you have your documents prepared ahead of time, the application process shouldn’t take too long. Again, this will vary by whether or not you’re doing your application online or in-person with a local bank or credit union. 


Alternative Startup Financing Options

SBA Loans are favored among startups because they often offer more flexibility than other options. That said, for some borrowers, there are other options that may work better. Here are some startup financing alternatives: 

  • Traditional Small Business Loans: The same types of lenders that offer SBA loans also offer their own forms of small business loans. These don’t always come with the best interest rates, but you have more options when it comes to terms. While you’re looking through SBA lenders, take a moment to see if they also offer their own financing. You might also consider dedicated startup business loans offered by online lenders.
  • Equipment Financing: If you're mainly looking to finance equipment, many in-person and online lenders offer equipment financing options. With potentially lenient credit and collateral requirements, equipment financing definitely has its perks. 
  • Business Line of Credit: Business lines of credit work similarly to credit cards in that you can draw on a credit line to make purchases for your business, pay down that line, and reuse it again. These are best for small purchases, say during renovations, that you can quickly pay down. 
  • Small Business Credit Card:  Business lines of credit are different from business credit cards. While they both provide the same function, small business credit cards often have smaller credit lines. These aren’t necessarily recommended for funding major startup costs, but can be used to make small purchases you can’t otherwise cover right away. 
  • Personal Loans: Many lenders require you to have a few months in business before finding funding, but personal loans can be used to initially start your business. These loans can be used for any general purpose (with the exception of purchasing property) and you can secure hundreds of thousands in funding from online lenders. 
  • Crowdfunding: Crowdfunded loans, often called peer-to-peer loans, are funded by private investors. For you, though, the loan process is similar. You get a repayment schedule and an interest rate determined largely by your credit score. You can find these loans on sites like Prosper and LendingClub
  • Small Business Grants:  The SBA provides a few small business grants to eligible entrepreneurs. The COVID-19 relief program is a prime example. Note that these are NOT for startups, but for those with a limited time in business. 
  • Friends and Family: If you don’t have the best financial track record and don’t want to take your chance on lenders, consider asking friends and family for financing. Approach this like any other business financing option, though. Present a business plan, set a repayment schedule you can actually stick to, and make sure they know how you plan to use their money. 
  • Personal Funding: While it’s not best to mix personal and business financials, it is a last-resort option. If you must, you can consider using personal credit cards, home equity loans, and retirement account loans.

Video: How To Get a Startup Business Loan

Final Word

Starting a business can take a lot of money, and many business owners don’t have all of that cash upfront. An SBA startup loan can help ease the burden of having to purchase retail space, order inventory, and purchase equipment all at once. Head to the SBA’s website to get the full details on these loans and find lenders that offer them. 


Can I get an SBA loan to start a business?

The loans we’ve discussed in this article can mainly be used to start a business, but you’ll have more limited options than those who have a record of a successful business. How long you need to be in business, depends on the lender you choose, as they have their own specific requirements.

Do SBA startup loans require collateral?

Whether or not you need to put up collateral largely depends on the lender you choose to work with. Some lenders that offer more relaxed credit requirements will require collateral to ensure they’ll get something back if you stop making payments. Additionally, larger loans require collateral much of the time, while smaller loans aren’t as risky for the lender, so they don’t require collateral. 

What documents are needed to apply for an SBA loan?

When you apply for an SBA loan, especially one that’s for a business you’re just starting, you’ll need to supply any documentation that proves you have a solid business plan and the means to pay back the loan. This can include tax returns, cash-flow projections, your business plan, and explanations of how you’ll use any financing. The exact documents you need depend on the lender you’re working with. 

Is it hard to get approved for an SBA loan?

SBA Loans often have less strict requirements (but that depends on the lender you’re working with) than other loan options. While it’s not difficult to get approved, it takes some work on your part to find the right lender. 

What can disqualify you from getting an SBA loan?

SBA Loans are loans after all, so there are some borrowers that won’t qualify. For starters, if you have very bad credit, you likely won’t find a lender willing to work with you. No matter how good your business plan is if you have a history of poor borrowing, lenders don’t want to take on the risk. 

Additionally, those who are trying to get a loan just because they don’t want to spend their personal savings won’t qualify. The SBA requires that you use your own money before seeking them out. 

What is the easiest SBA loan to get?

Loans that offer smaller amounts, like SBA microloans and SBA Express Loans, are often easier to get. Since the lender is taking on less risk by offering you a smaller loan, they have more relaxed requirements.

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

More about me

Related Articles

Show More