SBA 7a Loan Program

Each year thousands of entrepreneurs obtain SBA 7a loans to pursue their American dream. An overview:

Loan SizeUp to $5,000,000.
Loan Term10 years for non-real estate loans; 25 years for real estate loans.
Interest RatesSBA interest rates are slightly higher than conventional loans. Rate is negotiated with SBA lender and subject to SBA max interest rate. Learn more about SBA interest rates –>
Use Loan of ProceedsBuy a business, real estate, equipment, debt refi, partner buyout or buy-in, franchise opening, and ⁠working capital are most common.
Down Payment10% to 20% down payment is common, but SBA and its lenders are enacting lower thresholds in August 2023.
Cash Flow Profits (EBITDA) of at least 115% of SBA loan payment. SBA loan payment calculator –>
Credit Score
680+ is ideal. 640 – 670 is borderline. Under 640 unlikely. SBA credit score insights –>
Collateral
None required but lender must secure all available collateral.

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SBA loans versus traditional commercial loans

SBA loans are designed to provide access to financing for borrowers who may not qualify under more stringent underwriting standards of traditional commercial and industry (C&I) loans. On average, SBA loans have slightly higher interest rates than C&I loans but offer numerous benefits to otherwise not financeable borrowers, such as lower monthly payments and reduced collateral and no loan covenants.

 SBA LoanTraditional Loan
Down Payment*10% – 20%20% +
Term (in years)10 or 255 to 7
CollateralNoneFully collateralized
Loan CovenantsNoneMany (learn about covenants) –>

* A new SOP from the SBA to be enacted 8/1/23 should further reduce the down payment requirements for SBA borrowers.