SBA Startup Loans

What is an SBA startup loan?

The Small Business Administration offers a variety of desirable loans for small business owners seeking financing, including the popular 7(a) loan, microloans, 504 loans, and community advantage loans. While there’s no dedicated startup SBA loan, many SBA loan programs encourage startups to apply. SBA loans are designed to offer favorable terms to small business owners and make it possible for businesses to get the funding they need. It’s often difficult for startups to get approved for financing as they pose a greater risk to lenders with no proven track record of success. On this page, we’ll outline the different types of SBA loans and the ones best suited for startup businesses.

SBA microloan

Loan amount: Up to $50,000
Uses: Working capital, inventory, supplies, equipment, business expenses
Best for: Starting a business

The SBA microloan is designed for startups and provides up to $50,000 for startup related costs – anything from purchasing supplies or equipment or general working capital to start a business. Microloans have a much lower funding amount than other SBA loans, but still offer a term length of up to eight years.

Similar to other SBA loans, the microloan is applied through a community lender and backed by the SBA. Each lender may have its own qualifications and requirements.

SBA Community Advantage loans

Loan amount: Up to $350,000
Uses: Almost any business expense
Best for: Starting a business

Community Advantage loans target underserved communities, especially businesses who may not qualify for other types of loans. Community Advantage loans are specifically for mission-focused and community-centered businesses. This SBA loan program does not consider business profits or collateral, which makes it a great option for businesses just starting out. Lenders typically offer long loam terms of up to 10 years.

SBA 7(a) loans

Loan amount: Up to $5 million
Uses: Almost any business expense
Best for: Growing a business

The 7(a) loan is a popular SBA loan program, which encompasses several loan types, each with their own terms. The general 7(a) loan provides funds for almost any business expense of up to $5 million, while the SBA Express offers up to $500,000 for smaller projects. Most 7(a) loan programs offer 10-25 year terms, with an SBA-backed guarantee of up to 85%.

SBA 504 loans

Loan amount: Up to $5 million
Uses: Real estate, machinery and equipment or other major purchases
Best for: Growing a business

The SBA 504 loan provides funds for large equipment or machinery purchases or real estate. It’s designed to fund “business growth and job creation.” 504 loans can be harder for startups to qualify for, as this loan often requires business owners to put up 10% of the loan. Generally, this loan is only guaranteed up to 50% by the SBA, with the remaining 40% offered by the Certified Development Companies, SBA’s community partner.

What are the benefits of an SBA startup loan?

The SBA offers favorable terms such as lower interest rate, longer repayment terms, and more for qualifying small businesses. Some loan programs also offer high funding amounts, making it a popular financing choice for small businesses nationwide. Startups usually struggle more than well-established businesses to get loan approval, but some SBA programs were designed with startups in mind and don’t require an annual revenue threshold. This makes it a popular option for businesses getting off the ground to get the funds they need.

Business owners seek SBA financing due to its favorable terms.

• Capped interest rates set by the SBA
• Larger loan amounts
• Flexibility on fund use
• Resource centers and continued entrepreneur support

How to get an SBA loan for a startup

Getting a loan as a new business can be difficult. Without a track record of success or profits to show, lenders are less likely to grant loans. But, it’s not impossible with the SBA. In order for your application as a startup to start out, there are a few things you can do.

1. Calculate costs: You can’t apply for a loan without knowing how much you need to borrow. Factor in all costs related to your business – including one-time costs such as permits and licenses and recurring costs like rent, inventory, or payroll. This will give you a realistic idea of how much money you need to get your business started.
2. Write a business plan: A well thought-out business plan shows lenders you have a solid understanding of your business and its market landscape. It gives insight into your business and shows how your business can be a success with the right funding.
3. Find a lender: Determine which SBA loan program best suits your needs. Are you looking for working capital or need funds to cover equipment purchases? How much funding do you need? Once you have a basic idea, find a lender that offers SBA loans and suits your business needs. You can use the SBA website to search for lenders or ask your local bank.
4. Prepare your application: Once you assemble your documents and business plan, you can get started on the application. Know that the SBA application process can take anywhere from 30-90 days and plan accordingly.

What are the application requirements?

The SBA loan application process can take anywhere from 30-90 days and typically requires a lot of documentation. Here’s a general idea of what you’ll need to apply:

• Business and personal credit score
• Bank and financial statements
• Personal financial statements
• Accounts receivables and accounts payable