What is a Small Business Administration (SBA) Loan?

Small Business Owners and entrepreneurs of all industries often need to seek financial assistance at some point or another. One of the best ways to secure funding is with an SBA loan.

What is an SBA Loan?

What is a Small Business Administration (SBA) Loan?

An SBA loan is a type of business financing that is guaranteed by the U.S. Small Business Administration or “SBA”. The SBA sets guidelines and works closely with lenders in order to secure loans for small business owners. With the SBA minimizing risk for the lender, obtaining small business financing is made infinitely easier.

It is in the very mission statement of the Small Business Administration to help Americans start, build, and grow businesses. This has been true of the SBA since its inception in 1953 as an independent agency of the federal government. The Small Business Administration is tasked with aiding, counseling, assisting, and protecting the interests of small business concerns, preserving free competitive enterprise, and maintaining and strengthening the overall economy of our nation.

A common misconception about SBA loans is that the Small Business Administration acts as a lender. While they do create the guidelines for all of the loan programs that bear the SBA name, they are not lenders or servicers of any loans. Instead, they work closely with approved lender partners who are able to utilize the provided guidelines to originate flexible financing options for small businesses.

About SBA Loans

Small Business Administration loans can range anywhere from $500 to $5.5 million. Loan proceeds can be utilized for most business purposes, including operating capital and long-term fixed assets. Impressively, there are multiple loan products under the SBA umbrella to choose from, so no matter what the need is, there is more than likely an SBA guaranteed product that will benefit your business.

SBA loans are available to most small businesses with a few easy to remember requirements. Any business seeking SBA financing must be a for-profit company, must be located in and conduct business in the United States, must have owner-invested equity, and must not get funds from any other financial lender. As with any other business financing, business size, ability to repay, and the purpose of the business is also taken into consideration.

Types of Small Business Administration Loans

The SBA guarantees many different types of loans, to meet the unique needs of most small business owners. There are a few different options when shopping around for an SBA loan, and choosing the right loan for your business is what is most important. While the standard SBA 7(a) loan is the most widely used of the bunch, that does not mean that it is a one size fits all solution for small business funding.

The different SBA loans and what they are used for are:

  • SBA 7(a) Loan - This is the standard SBA loan product, for up to $5 million in funding.

  • SBA 7(a) Small Loan - A smaller, more cost-effective loan than the original 7(a), with funding up to $350,000.

  • SBA Express Loan - SBA financing at an accelerated pace. Funding up to $350,000 with a much faster turnaround time and a guaranteed response within 36 hours. 

  • SBA Export Express Loan - Another streamlined loan process, for Export companies looking to secure up to $500,000. Guaranteed response within 24 hours.

  • SBA Export Working Capital Loan - Up to $5 million for working capital to be used by export companies 

  • SBA International Trade Loan - Long-term financing for growing export companies or exporters battling imports and foreign competition.

  • SBA 504 Loan - Up to $5 million SOLELY for the purchase, construction, acquisition, rehabilitation, and/or modernization of fixed assets. 

SBA financing is more than just awesome individual loan products, too. The SBA has preferred lenders in place to provide more flexible financing options for business owners. There is also the Veterans Advantage Program that provides reduced fees for the rapidly growing veteran-owned business population. Finally, The SBA has an umbrella program dubbed “CAPLines” which are basically different types of business lines of credit to help small business owners meet their short-term and cyclical working-capital needs.