SBA 7(a) Loans

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Get to know SBA 7(a) loans

SBA 7(a) loan details

What is an SBA 7(a) loan?

The SBA 7(a) loan program is the U.S. Small Business Administration’s most popular lending program. It includes several types of loans and is designed to help small businesses that qualify for financing, but are having trouble getting a similar loan elsewhere. 

The SBA doesn’t make these small business loans; instead it guarantees a percentage of the loan for the financial institutions who make the loans, making them somewhat less risky and more appealing to lenders.

The maximum loan amount is $350,000—$5 million depending on the type of loan, and funds may be used for a variety of business purposes, including working capital needs, commercial real estate, equipment, or even refinancing certain debts. 

Interest rates are competitive and repayment periods can be as long as 10— 25 years, depending on the type of loan and how the funds are used.

SBA loans work a lot like bank loans, and many are made by banks and other approved financial institutions. 

The main difference between an SBA loan and a traditional bank loan is that the SBA has specific requirements each lender must follow. If a borrower doesn’t repay the loan, and the financial institution has followed those SBA guidelines, it can collect on the guaranty from the SBA. (The borrower isn’t off the hook, though. The government may still take collateral and try to collect the balance due.)

Types of SBA 7(a) Loans

There are several types of SBA 7(a) loans: 

The qualification requirements for each are largely similar, though there may be certain requirements that go with each type of loan. For example, to qualify for an International Trade Loan, you’ll have to demonstrate loan proceeds will be used to significantly expand an existing export market or develop new export markets, or that your business has been hurt by import competition and proceeds will be used to improve your competitive position. 

Veterans Advantage is a program that reduces or waives fees for business at least 51% by veterans, active duty members eligible for TAP,  members of the National Guard (including reservists) and spouses of those listed.

2025 changes to SBA 7(a) loans

As of June 1, 2025, several key changes have been made to the guidelines for the 7(a) loan program. We will discuss several in this article, including:

• Revised credit requirements, including a higher FICO SBSS score for certain loan programs.
• Loans may only be made to businesses owned by U.S. citizens, lawful permanent residents (LPRs a.k.a. “green card holders”), naturalized citizens, or U.S. nationals. 
• No money down loans to startups are not allowed; 10% owner equity injection is required. 

SBA 7(a) Loan Requirements

When it comes to qualifying for an SBA loan, the SBA has specific eligibility requirements businesses must meet. These are extensive, but three core requirements are that applicants must:

1. Be a for-profit business located in the U.S.
2. Meet the SBA size standards as a small business (varies by industry)
3. Demonstrate the ability to repay the loan from cash flow

Cash flow is a key requirement. In its guidelines, the SBA states: 

“If the Lender’s financial analysis demonstrates that the Applicant lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must be declined, regardless of the collateral available or outside sources of repayment.” (Italics added)

New businesses should be able to demonstrate the ability to project positive cash flow within two years.

Other requirements include that:

• Applicants meet the character requirements for all owners with 20% or greater ownership, including prohibitions on business owned by individuals with certain types of criminal histories
• Must be owned 100% by  U.S. citizens, lawful permanent residents (LPRs), naturalized citizens, or U.S. nationals. (Previously, eligible businesses were required to have 51% or greater ownership by a US citizen or lawful permanent resident.
• Franchise businesses must, at a minimum, be listed in the SBA Franchise Directory.
• Not be able to qualify for similar credit elsewhere (known as the “credit elsewhere” test)

Summary of Key Disqualifiers for SBA Loans

There are nuances to many of these restrictions. For example, a for-profit subsidiary of a non-profit organization may be eligible. And if you are on a payment plan to repay delinquent federal tax debt, you may be eligible. 

If you’re not sure whether you qualify, you can review the restrictions starting on page 13 of the Standard Operating Procedures or, better yet, talk with an SBA lender who can guide you.

What Credit Score is Required? 

SBA requires acceptable credit. There is no specific minimum personal credit score; however, all 7(a) Small Loan applications (loans of $350,000 or less) will begin with a screening for a FICO^® Small Business Scoring Service^SM Score (SBSS Score).

The FICO SBSS is a business credit score that can analyze the personal credit data of up to five owners (those with 20% or greater ownership), the business credit of the business and even financial data. If the FICO SBSS score is below 165 (out of a score range of 0-300), it doesn’t necessarily mean you’re out of luck. In that case, the application must go through additional screening. 

It is not unusual for banks and other SBA lenders to have their own minimum personal credit score requirements. Minimum personal credit score requirements typically range from 670—700+.  

*Note there are a few personal FICO score models with different ranges, and the newest version of the FICO SBSS score has a score range of 300-850

Bad credit is generally a hurdle to qualifying for these loans. 7(a) loan programs aren’t considered bad-credit business loans. Remember, the SBA requires a credit check for all owners with at least 20% ownership. Not only should you check your own personal and business credit before you apply, if you own a business with someone else, be sure to discuss credit together before applying.

SBA 7(a) Loan Interest Rates

Interest rates on 7(a) loans are considered competitive and are often lower than borrowers can get elsewhere. Loans may carry a fixed or variable interest rate. Variable rate loans will be tied to the prime rate, the SBA Optional Peg rate or one-monthly LIBOR (though LIBOR is being phased out.)

While lenders negotiate interest rates with borrowers, they cannot exceed the SBA’s maximum interest rate. Unlike other small business loan interest rates, a default rate is not allowed. That means the borrower’s rate won’t skyrocket if they miss a monthly payment. 

You can find current SBA loan rates here.

Fees

The SBA requirements on loan fees help protect small business borrowers against excessive fees. A few are allowed, while others are prohibited. Generally, though, small business owners will find the fees on these loans are less than loan fees and closing costs on other commercial loans.

All fees are based on the guaranteed portion of the loan unless otherwise noted and lenders are prohibited from splitting loans to reduce fees.

Fees for multiple loans made within 90 days are combined for guaranty fee calculation.

SBA lenders may require borrowers to pay out of pocket expenses such as: UCC filings or recording fees, photocopying, delivery charges, collateral appraisals and environmental investigation reports. Legal fees may also be charged to the borrower, within certain limits. 

Late fees of up to 5% may be charged if a borrower is more than 10 days delinquent on a payment. 

Be sure to ask your lender to break down all applicable SBA fees for your specific loan and factor in these fees when calculating your total borrowing costs. If you’re a veteran-owned business, ask about the SBA Express fee waiver.

How Much Can You Borrow and What Can You Use It For? 

Most SBA 7(a) loans have a limit of $5 million, except for 7(a) Small Loans and Community Advantage loans which go up to $350,000;  SBA Express and Export Express Loans of up to $500,000.

The length of the loan will depend on how the loan proceeds will be used.  (The repayment period may also be called the “loan term” or “loan maturity.”) Generally the SBA requires the lender to make the loan for the shortest period of time based on how the loan proceeds will be used, the useful life of assets acquired, and the borrower’s ability to repay. 

The SBA guidelines require the following loan repayment terms: 

• Working capital and inventory: up to ten years. 
• Equipment, fixtures, or furniture loans: up to ten years, though it can be extended to 15 years if the useful life of the asset justifies it. 
• Real estate: up to 25 years, with extensions in some cases involving construction or renovation.
• Leasehold improvements: up to 10 years plus up to an additional 12 months allowed to complete improvements.
• Mixed purpose loans may result in a blended maturity date.

SBA 7(a) loans are often working capital loans and they may be used for working capital purposes that include:

• Purchase inventory, supplies and raw materials
• Refinance certain existing business debts

They may also be used to: 

• Acquire land (lease or purchase) for an eligible project
• Improve a site (e.g., grading, streets, parking lots, landscaping) including up to 5 percent for community improvements such as curbs and sidewalks
• Purchase one or more existing buildings
• Convert, expand, or renovate one or more existing buildings
• Construct one or more new buildings
• Acquire (lease or purchase) and install fixed assets

An SBA loan may also be used for business acquisition or changes in ownership, as long as certain conditions are met. 

Notably there are some important restrictions on the use of proceeds. They include: 

• Real estate investments for property that will be acquired primarily to use for sale, lease, or investment
• To pay certain delinquent taxes
• To relocate out of the community when that will result in a net loss of job (with some exceptions)

If you are hoping to use a 7(a) loan to acquire real estate, the general rule of thumb is that your business must occupy at least 51% of the rentable space when acquiring an existing property. For new construction, your business must generally occupy at least 60% of the rental property with restrictions on how long you can lease out the remaining property over the next decade.

Step-by-Step SBA 7(a) Loan Application Process

Getting an SBA loan will likely be harder than getting an online loan, but should be no harder than getting a typical bank loan. Be prepared for a fairly long turnaround time, though there are some lenders that can streamline the process to about a month or so. You should be prepared to provide financial statements, tax returns and other documentation. Your lender can guide you through the process.

Once you have determined an SBA loan is right for your business, the next steps are to:

Gather your documents

Most lenders will ask for:

• Personal and business tax returns (2–3 years)
• Business financial statements (P&L, balance sheet)
• Business bank statements
• Business debt schedule
• Personal financial statement
• Any relevant licenses or registrations
• Business plan

Organizing your documents ahead of time can save you time, and can be helpful regardless of what type of business financing you get. 

Find an SBA-approved lender

Not all lenders can make SBA loans. You’ll need to find one that does. 7(a) loans are made by banks and other financial institutions approved by the SBA to participate in SBA lending.

You may see the term Preferred Lending Partner, or PLP. This means the lender has been given approval by the SBA to underwrite their SBA loans and make credit decisions without SBA approval (in most cases). A PLP may be able to process an SBA loan application more quickly.

Also keep in mind that each lender may have its own preferred target customer. As long as a lender meets the SBA requirements and doesn’t discriminate on a prohibited basis,  it may impose additional requirements. If your application with one SBA lender doesn’t get approved, try to find out why and determine whether that’s due to SBA loan requirements or the lender’s internal standards. 

Apply now

SBA Loan by SmartBiz

For high cost projects with long repayment. No immediate funds needed.

Pros

• APR as low as 11.25% with monthly repayment plans up to 10 years
• Ability to be pre-approved and review terms and conditions before needing to provide a full list of financial documents.

Cons

• Lengthy application process (30-60 days) with lower approval odds
• Requires more documents than other Bank Loan products.

Funding Amount

$30,000 - $500,000

Cost

11.25% - 13.25% APR

Repayment Terms

Monthly payments for 10 years

Funding Speed

1 month

Show details

Complete the loan application

Your lender will guide you through the paperwork, which may include:

• SBA Form 1919 (Borrower Information)
• SBA Form 413 (Personal Financial Statement)

You can review these forms yourself to understand the types of questions you may be asked, but your lender will guide you through the application process. 

Be prepared to explain how you’ll use the funds and how your business will repay the loan.

Wait for underwriting and approval

The lender will review your application, then submit it to the SBA for final approval. This stage can take:

• SBA Express loans: As little as 36 hours (for approval, not funding)
• Standard 7(a) loans: 2 to 6 weeks or longer
• Respond quickly to any follow-up questions to avoid delays.

Receive funds

Once approved, your loan will move to closing and disbursement. This typically involves signing legal documents and setting up your repayment schedule.

Alternatives If You Don’t Qualify

Not all businesses will have the time or patience to qualify for SBA loans. The loan application process can take weeks, and it can easily be 1-3 months before the loan funds. In addition, it can be challenging to get an SBA loan for a startup. 

If you don’t qualify for an SBA loan, you may want to look for other types of small financing options. If your business has strong financials and strong credit, you may be eligible for conventional financing through a bank or credit union. 

Other options may include: 

• Lines of credit
• Equipment financing
• Invoice financing
• Crowdfunding
• Small business credit cards

Find more small business loan options here.

Frequently Asked Questions

Can startups use 7(a)?

Some lenders do offer 7(a) loans to startups in business for a year or less. However, these owners are required to contribute at least 10 percent of the total project costs. While you may think of this as a down payment, it is officially called an “equity injection.”

Do SBA 7(a) loans require a personal guarantee?

Personal guarantees are generally required. An individual who owns 20% or more of the business must provide a full unlimited personal guarantee. (Sometimes referred to as “guaranty.”) And each loan must be guaranteed by at least one individual or entity.

Sometimes the SBA may require a personal guarantee from a key person in the business even if they don’t own 20% or more of the business. Spouses may be required to sign a personal guarantee when the combined interest of the two spouses and minor children totals 20% or more. In addition, non-owner spouses will be required to sign off if jointly held collateral (such as home equity) is pledged.

Is collateral required?

You don’t have to have collateral to get an SBA loan. However, the SBA will require the applicant to pledge collateral when it is available to fully secure the loan. If there is not sufficient collateral in the business, the SBA must take available equity in the personal real estate (residential and investment property) of any owners with 20% or more ownership. (An exception is made if there is less than 25% equity in personal real estate.)

SBA 7(a) Small Loans of $25,000 or less do not require collateral. 

Personal guarantees are also generally required. An individual who owns 20% or more of the business must provide a full unlimited personal guarantee. (Sometimes referred to as “guaranty.”) And each loan must be guaranteed by at least one individual or entity. Sometimes the SBA may require a personal guarantee from a key person in the business even if they don’t own 20% or more of the business. Spouses may be required to sign a personal guarantee when the combined interest of the two spouses and minor children totals 20% or more. In addition, non-owner spouses will be required to sign off if jointly held collateral (such as home equity) is pledged. 

Note that startup businesses (businesses in year for one year or less) require the small business owner to contribute at least 10 percent of the total project costs. While you may think of this as a down payment, it is officially called an “equity injection.”

Is insurance required?

Many small business loans require insurance to help protect the lender and SBA loans are no different. Hazard insurance is required on any assets the business pledges as collateral. Additional insurance may be required as appropriate, including:

• Marine insurance
• Flood insurance
• Product liability insurance
• Worker’s compensation
• Malpractice insurance
• Disability insurance

Life insurance may be required on the owners or key employees of certain businesses where the loan is not fully secured by collateral.

What are other SBA loan programs?

Keep in mind that there are times other SBA financing programs may be a better fit for your business needs. Just a few examples: 

• SBA Disaster Loans help businesses impacted by a federal declared disaster such as a flood, fire or hurricane.
• SBA Microloans are smaller loans (of up to $50,000) 
• 504 CDC Loans may be used for real estate acquisition or expansion of facilities as well as the purchase of certain equipment
• Export loans may be used by businesses currently involved in, or hoping to be involved in, exporting. 

Learn more about the various types of SBA loans here.

Related Resources

• SBA Loans
• Bank loans
• Merchant Cash Advance
• Microloans
• Cash Flow Loans
• Online Business Loans
• Construction Business Loans
• Retail Business Loans
• Restaurant Loans & Financing Options
• SBA 7(a) Loans
• SBA Express Loans
• Business Credit Cards
• Equity Crowdfunding
• Reward-Based Crowdfunding
• Equipment Financing
• Invoice Financing
• How Trade Credit Can Help Your Business
• Medical Practice Loans
• Manufacturing Business Loans
• Commercial Real Estate Loans
• SBA Microloans
• SBA 504 Loans
• SBA Disaster Loans