An SBA loan can give your business a long repayment term and a lower rate than many other options, but qualifying takes more than filling out an application. You have to meet the U.S. Small Business Administration’s eligibility rules, and then your lender’s own requirements on top of them.
This guide breaks down both: the official SBA loan requirements, what lenders look for, the documents you’ll need, and how requirements differ across the main SBA loan programs.
To qualify for an SBA loan, your business generally must:
These rules come from the SBA’s 7(a) terms, conditions and eligibility. Lenders then set their own minimums for credit score, time in business, revenue and collateral.
SBA loans are for operating businesses that earn a profit. Nonprofits, charities and religious organizations aren’t eligible. Your business must operate, or plan to operate, in the U.S. or its territories.
The SBA defines “small” by industry, usually based on average annual revenue or number of employees. The limits vary widely, so check your industry in the SBA’s size standards. Most small businesses that apply for loans fall well within them.
Some businesses can’t get SBA loans at all. According to the SBA, these include businesses engaged in illegal activities, lending and investment firms, passive real estate investment firms, speculative businesses, pyramid sales plans, businesses whose main activity is gambling, and nonprofit, charitable and religious organizations.
The SBA expects owners to have their own money invested in the business, and to use available personal and business resources before turning to an SBA-backed loan. In practice, your lender documents that you couldn’t get the same financing on reasonable terms without the SBA guarantee. This is why SBA loans are often a good fit for businesses with solid fundamentals that don’t yet meet a bank’s conventional lending standards.
Your business has to show it can make the payments, usually from its cash flow. Lenders look at your tax returns, financial statements and bank statements to confirm that existing revenue comfortably covers the new loan alongside your other debts.
The SBA guarantees part of the loan, but banks and other lenders make the decision. Most will review:
1West helps small businesses apply for SBA loans through our lending partners. Our SBA program generally looks for:
SBA loans through 1West range from $30,000 to $5 million, with terms of 10 to 25 years and rates as low as 9.75%. Funding typically takes about a month. Learn more about SBA loans with 1West.
| Program | Maximum amount | Common uses | Key requirements and terms |
|---|---|---|---|
| 7(a) loan | $5 million | Working capital, equipment, real estate, refinancing, buying a business | Most flexible program. Maximum maturities of 25 years for real estate and 10 years for equipment and working capital |
| SBA Express | $500,000 | Working capital, lines of credit, equipment | A 7(a) loan with a faster lender decision and a lower SBA guarantee (up to 50%) |
| 504 loan | $5.5 million | Buildings, land and long-term equipment | Fixed-asset projects only. No working capital or inventory. 10-, 20- and 25-year terms |
| Microloan | $50,000 | Startup and small working capital needs, inventory, equipment | Made by nonprofit intermediary lenders. Terms up to 7 years; the average loan is about $13,000 |
Figures are from the SBA’s 7(a), 504 and microloan program pages. For a smaller loan built around community lending, see our guide to SBA Community Advantage loans, and to SBA microloans.
The SBA doesn’t publish a minimum credit score for its loans. Each lender sets its own, and many look for scores in the mid-600s or higher for 7(a) loans. Microloan intermediaries can be more flexible; the SBA notes that even borrowers with bad credit may qualify for startup funding through some programs.
If your score is lower, read our realistic guide to getting an SBA loan with bad credit, or see what credit score you need for a business loan in general.
Under federal regulations, anyone who owns at least 20% of the business generally must personally guarantee the SBA loan (13 CFR 120.160). That means you’re personally responsible for repaying the loan if the business can’t. Lenders can also ask other people, such as owners with smaller stakes or a spouse, for full or limited guarantees.
The SBA requires reasonable owner equity, and lenders often turn that into a down payment, especially for startups, real estate purchases and business acquisitions. The amount depends on the program, the lender and the deal.
For collateral, lenders typically take available business assets such as equipment, receivables and real estate. For larger loans, they may also take a lien on personal real estate. Not having much collateral doesn’t automatically rule you out, but it can affect the loan size and terms.
Exact requirements vary by lender and loan size, but most SBA lenders ask for:
At 1West, you’ll typically need your last 6 months of business bank statements, a business debt schedule, 2 years of business tax returns, and interim year-to-date financials (profit and loss statement and balance sheet).
Most 7(a) loans carry an upfront SBA guaranty fee, calculated on the guaranteed portion of the loan. According to the SBA, it’s 2% for loans of $150,000 or less, 3% for loans from $150,001 to $700,000, and for larger loans, 3.5% of the guaranteed portion up to $1 million plus 3.75% of the guaranteed portion above $1 million. Lenders may also charge their own packaging or closing costs.
It’s possible, but harder. Without an operating history, lenders lean heavily on your personal credit, industry experience, business plan and how much of your own money you’re putting in. Microloans are often the most accessible SBA option for new businesses. If you’re just getting started, also see how to fund a startup without investors.
Expect the process to take longer than other financing. See how long it takes to get an SBA loan. If you’re turned down, you can usually reapply. Here’s what to know about applying for an SBA loan twice.
An SBA loan isn’t the only path to affordable funding. Depending on what you need the money for, consider working capital loans, a business line of credit or equipment financing, which often have simpler requirements and faster funding. Compare more options in our guide to non-SBA loan alternatives.
Owners with a 20% or larger stake in the business generally must personally guarantee an SBA loan. Lenders can ask others to guarantee the loan too.
The SBA doesn’t set a minimum. Lenders do, and many look for scores in the mid-600s or higher for 7(a) loans. 1West’s SBA program looks for a minimum FICO score of 650.
The SBA doesn’t require a minimum, but most lenders prefer two to three years or more. 1West’s SBA program looks for at least 3 years in business. Startups may have better luck with microloans.
Lenders generally take available business assets as collateral and may take personal real estate for larger loans. At 1West, SBA loans over $350,000 require real estate collateral.
Up to $5 million with a 7(a) loan, up to $500,000 with SBA Express, up to $5.5 million with a 504 loan and up to $50,000 with a microloan.
Longer than most business loans. With 1West, funding typically takes about a month once your application is complete. Missing documents are the most common cause of delays.
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