It’s tricky to navigate the wide world of SBA loans. Here, we examine several types of SBA loans available to business owners. The standard SBA 7(a) loan is the most common, but it’s important to discuss with your lender which loan is best suited for your specific needs.
SBA 7(a) Standard Loan
If you’re considering a 7(a) standard loan, the turnaround time can be as short as five to 10 days. Some SBA-qualified lenders can also be granted authority to approve your loan without the SBA’s review, making the process faster.
The maximum loan amount for a standard 7(a) loan is $5 million. The SBA will guarantee this type of loan for up to 85% for loans smaller than $150,000 and 75% for loans greater than $150,000. Interest rates are negotiated between the lenders and borrowers, but that percentage may not exceed the SBA maximum rate.
Qualified lenders can fill you in on collateral requirements, which are based on the amount you’re requesting. For loans of $50,000 or less, qualified lenders aren’t required to request collateral, and for loans in excess of $350,000, the SBA requires that the qualified lender collateralize the loan to the maximum extent possible (up to the loan amount).
If your business’s fixed assets don’t fully secure the loan amount, the lender may include trading assets (using 10% of the current book value for the calculation). They must also take available equity in the personal real estate (residential and investment) of the principals as collateral.
SBA 7(a) Small Loan
The SBA 7(a) small loan option can be used for smaller loans of up to $350,000. As with the standard loan, the SBA will guarantee this type of loan for up to 85% for loans smaller than $150,000 and 75% for loans greater than $150,000. Interest rates are negotiated between the lenders and borrowers, but that percentage may not exceed the SBA maximum rate.
Collateral works the same way with the 7(a) small loan as it does with the standard 7(a):
For loans of $50,000 or less, qualified lenders aren’t required to request collateral.
For loans in excess of $350,000, the SBA requires that the qualified lender collateralize the loan to the maximum extent possible, up to the loan amount.
SBA Express Loan
The SBA Express Loan is used for loans of up to $500,000. The lender makes the credit decision without prior SBA review, and in exchange SBA guarantees only 50% of the loan. An SBA Express revolving line of credit can run up to 10 years, including its term-out period.
SBA 504 Loan
The SBA 504 loan is used for economic development and cannot be used for working capital or inventory. This loan often offers a lower down payment, lower interest rates, and lower fees, depending on the size of the economic development project.
SBA CAPLines Loan
SBA CAPLines loans are lines of credit for businesses’ cyclical or short-term needs. They feature four specific lines:
Seasonal CAPLine: Borrowers can only use the loan proceeds for seasonal increases of accounts receivable and inventory.
Contract CAPLine: This is for the direct labor and material costs of fulfilling assignable contracts (revolving or non-revolving).
Builders CAPLine: This is for the direct labor and material costs of an individual general contractor or builder that constructs or renovates commercial or residential buildings. The building project will be the collateral.
Working Capital CAPLine: This is an asset-based revolving line of credit for businesses that can’t meet the credit standards of long-term credit. Repayment is made by converting short-term assets into cash, which is given to the lender.
SBA Export Working Capital, Export Express Loans
Export Working Capital loans are for businesses that can generate export sales and that require additional working capital for these sales. Lenders review and approve applications, and submit the request to the U.S. Export Assistance Center location servicing the exporter's region.
The Export Express program gives exporters and lenders a more efficient way to get financing backed by the SBA for loans and lines of credit of up to $500,000. Each lender has an individual credit decision process and loan documentation. The SBA will respond to your application within 24 hours.
SBA Veterans Advantage
If you’re a veteran and small business owner, we thank you for your service. SBA Veterans Advantage was a fee-relief program SBA ran from 2014 to 2018, and it is no longer available. SBA Express loans, up to $500,000, to a business owned and controlled by a veteran or a veteran's spouse still carry no upfront guaranty fee.
Veterans Advantage eligibility rules required the business to be at least 51% owned and controlled by veterans (other than those dishonorably discharged), active-duty service members in the military's Transition Assistance Program, Reserve or National Guard members, or the current spouse of someone in any of these groups. The program could also cover a business owned by the widowed spouse of a service member who died in service or of a service-connected disability.
Below is a quick-reference table summarizing the types of loans available.
SBA Loan Comparison Table
Loan Name | Summary |
|---|---|
SBA 7(a) Standard Loan | In five to 10 days, you can get a loan of up to $5 million. SBA guarantees 75% to 85% of this loan. |
SBA 7(a) Small Loan | For loans of up to $350,000. |
SBA 7(a) Express Loan | For loans of up to $500,000. The lender makes the credit decision without prior SBA review. The SBA will only guarantee 50% of this loan. |
SBA 504 loan | This loan is used for economic development and can’t be used for working capital or inventory. It often has a lower down payment and lower fees. |
SBA 7(a) CAPLines Loan | This is a line of credit for businesses’ cyclical or short-term needs. |
SBA Export Working Capital Program Loan | For businesses that can generate export sales and that need additional working capital to support these sales. |
SBA Export Express Loan | This loan gives exporters a more efficient way to get financing backed by the SBA for loans and lines of credit of up to $500,000. |
SBA Veterans Advantage Loan | Ended in 2018. Today, SBA Express loans (up to $500,000) to businesses at least 51% owned and controlled by veterans or their spouses carry no upfront guaranty fee. |