Your Complete 9-Step Guide to Small Business Administration Loans

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If you need financing for your business at a reasonable interest rate, a loan that’s partially guaranteed by the Small Business Administration (SBA) might be the perfect way to get your venture off the ground.

The Small Business Administration works with lender partners, microlenders, and community development organizations to make low-rate loans available to aspiring entrepreneurs and existing businesses.

By partially guaranteeing small-business loans from $500 to $5.5 million, the SBA reduces risks for lenders and borrowers alike. Money borrowed through SBA loans can be used for virtually any business purpose, including funding operations and purchasing long-term fixed assets.

But to qualify for these low-interest loans, you must meet strict requirements. If you’re interested in finding out how to get an SBA loan, this nine-step guide will take you through the process from beginning to end.

1. Choose which SBA loan is right for you

There are three main SBA loan programs to choose from. Start by researching your options to determine which loan is right for you:

  • The 7(a) loan program is the most common option. Small businesses frequently use it to buy equipment or real estate, acquire other companies, meet capital requirements, and refinance existing debt. You can borrow up to $5 million if you meet 7(a) loan requirements, and you might be eligible for variable- or fixed-rate loans.
  • The 504 loan program provides funding for major fixed asset purchases, such as buying land or buildings, purchasing equipment, or constructing or refurbishing new or existing buildings. You can borrow up to $5.5 million, but you aren’t eligible if your net worth exceeds $15 million or if your net income was more than $5 million in the preceding two years. Interest rates are fixed.
  • The Microloan program provides small businesses or new businesses with funding for furniture, fixtures, inventory, and working capital. You can borrow up to $50,000 with a repayment term of up to six years.

The SBA doesn’t directly fund these small-business loans but instead works with lenders to provide funding and loan guarantees to help companies gain access to funding.

SBA loan rates are often lower than rates on loans without the SBA’s partial guarantee. The loans typically require lower down payments, and repayment periods tend to be longer. These features make the loans more affordable for business owners.

However, the SBA charges a fee for its loan guarantee, the costs of which are often passed on to borrowers. It also charges a prepayment penalty on loans with repayment terms of 15 years or longer.

2. Run a for-profit business in the U.S.

To be eligible for an SBA loan, you must run a for-profit business that’s registered in the United States. Your business also must be physically located within the U.S., and it must conduct operations within the U.S. or its territories.

Your company can’t be engaged in speculation, investing, or lending, and you must not be in the rental real estate business.

3. Invest equity in your business

To be eligible for SBA loans, you must have invested your own money in the business. Specific equity requirements vary depending upon whether your company is new or established:

  • If you’re buying a business or your company is a new business, you should have invested $1 in cash or business assets for each $3 you hope to borrow.
  • For established businesses, the company should have no more than $4 in total debt for each dollar of net worth.

While loan approval might require you to put up personal assets to serve as collateral to qualify for a loan — such as taking out a second mortgage on a personal residence — it doesn’t count to fulfill the equity requirement. Only personal assets invested in your business satisfy this requirement.

4. Exhaust your other borrowing options

You won’t be eligible for an SBA loan if you could secure funds for your company from other sources.

For example, if a financial institution would lend you money under similar terms as an SBA loan or you have the money to personally invest in your business without undue financial hardship, you might not be eligible for an SBA loan.

5. Secure a good credit score

When you apply for an SBA loan, your company’s credit score matters. Businesses are assigned a credit score through the FICO Small Business Scoring Service (SBSS), and this score is used to prescreen applicants. Your personal credit score also can impact eligibility for an SBA loan.

FICO scores for small businesses range from 0 to 300. While the minimum score to qualify for an SBA loan is 140, most lenders won’t approve a loan unless your score is 160 or higher.

It can take years to build a credit score for your business, but a history of paying suppliers on time is helpful in earning the score you need. While your personal credit is also a factor, without establishing separate business credit, the highest SBSS score you can get is 140.

6. Find an SBA lender

To apply for an SBA loan, you’ll need to find a lender that offers loans guaranteed by the Small Business Administration. The SBA has a Lender Match tool available on its website. To use it, you’ll need to input the following information:

  • Your full name and contact info
  • The name and contact info of your business
  • A description of what your company does and the industry your business operates in
  • The amount of experience you have
  • The amount of funding you need
  • How you’ll use the money
  • Information on whether you have a business plan and financial projections, whether you’re a veteran, whether you have collateral, and whether your business is generating revenue

You’ll receive an email to verify your account and get matched up with lenders. You can then move forward in the process of applying for a loan with those providers.

7. Prepare your application documents

While individual lenders typically have their own loan requirements, there are some documents you’ll likely need when applying for any SBA loan:

  • Cash flow projections for a new business or a balance sheet and profit-loss statement for an existing business. Your projections or financial information should demonstrate your ability to meet business expenses and repay the loan.
  • Personal and business tax returns to verify your income and financial information.
  • Business documents, such as articles of incorporation, business licenses, and commercial leases.
  • Proof of your skills. You should be prepared to demonstrate that you have experience in the type of business you’ll be operating as well as management-level experience.
  • A detailed estimate of funding needs, such as information on project costs or capital requirements, and details on your current level of funding.
  • A list of collateral. You’ll need to pledge personal or business property to guarantee the loan.
  • A personal financial statement. You and any other company owners should provide detailed information about your personal liabilities and assets as well as your sources of income.
  • A detailed business plan. The SBA has a tool on its website to help you build a business plan if you don’t have one yet.

The more comprehensive and detailed you can make your application materials, the greater the chance of your loan being approved.

8. Submit your loan application

You’ll provide your loan application and business information directly to your lender, which will transmit the materials to the SBA to request a loan guarantee.

You’ll then wait to hear from your lender about whether your SBA loan is approved and what the final terms of your loan will be.

9. Put up collateral

The SBA typically requires collateral to secure the loans it guarantees. Company assets should first be offered as collateral, but if the company doesn’t have enough assets, personal assets can serve as collateral as well. In these cases, a lien would be placed on personal assets, such as your house.

By putting up business and personal assets as collateral, you take on a considerable risk. If you can’t repay the loan, your company or personal property could be lost. Before you decide to take on this liability, make sure you’re confident in your plan to use the borrowed funds to make your company profitable.

Should you take out SBA loans?

While you now know how to get an SBA loan approved, you also should consider other ways to secure funding, such as taking out personal loans or soliciting investors.

Compare loan terms, such as interest rates and collateral requirements, and consider the level of risk you’re comfortable with to make the most informed choice for your situation.

Interested in a personal loan?

Here are the top personal loan lenders of 2019!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.72% APR to 14.60% APR (with AutoPay). SoFi rate ranges are current as of February 15, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.79% – 20.89% (6.79% – 20.89% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.

7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

5.72% – 16.99%1$5,000 - $100,000

Visit SoFi

7.54% – 35.99%$1,000 - $50,000

Visit Upstart

7.99% – 35.89%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

5.99% – 29.99%3$7,500 - $40,000

Visit FreedomPlus

6.79% – 20.89%4$5,000 - $50,000

Visit Citizens

9.99% – 35.99%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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