What to Know About SBA Loan Terms Before Applying

by Kieran Daly
November 7, 2023
What to Know About SBA Loan Terms Before Applying

The U.S. Small Business Administration (SBA) plays a crucial role in providing financial support to entrepreneurs and small business owners across the country. SBA loans are designed to offer accessible and affordable financing to small businesses, facilitating growth and stability. 

In this comprehensive guide, we will delve into the intricate details of SBA loan terms, shedding light on the different loan programs available, interest rates, repayment periods, and collateral requirements. 

SBA Loan Terms and Programs

There are a variety of SBA loan programs. Here are some of the most common ones for small businesses. 

SBA 7(a) Loan Program 

SBA 7(a) loans are the most common type of SBA loan, as the government guarantees up to 75% of the loan. The SBA loan terms include a maximum loan amount of $5 million. Small business owners can use these loans for a variety of purposes. 

SBA 7(a) loans can be used to:

  • Buy or improve commercial real estate

  • For working capital

  • For refinancing business debt

  • To purchase furniture and supplies 

Repayment terms vary by what you are using the loan for. For real estate, SBA loan terms are 25 years max, while loan terms are 10 years max for other loan uses. Interest rates vary by the borrower and lender, but the max amount that can be charged is set by the SBA. For SBA 7(a) loans, that’s usually the SBA base rate plus 3% to 6.5%, depending on the loan amount. 

SBA Microloan Program 

The SBA microloan program is a small loan amount of up to $50,000. The average microloan is $13,000, according to the SBA. The funding is provided to intermediary lenders, usually nonprofit community-based organizations. These lenders then administer the program to eligible borrowers. 

Microloans can be used as working capital, to purchase inventory and supplies, to rebuild or repair equipment, and more. It cannot be used to pay off existing debts or to purchase real estate. 

The loan repayment terms are a maximum of six years, and the interest rate generally falls between 8% and 13% but varies by lender. 

SBA Express Loan Program

SBA’s express loan program is under the umbrella of the 7(a) program. This program is used by businesses that need a very quick turnaround of 36 hours. While this program is meant to give a faster turnaround process than typical SBA loans, borrowers still need to undergo the approval process with the individual lender, which can take weeks. 

These loans are usually smaller, as you can only borrow up to $500,000. The SBA loan terms are not as favorable, as the SBA guarantees only 50% of the loan, but you don’t need collateral for loans up to $50,000. In general, the loan repayment terms are up to 10 years. 

SBA 504 Loan Program 

The 504 loan program is a long-term way of getting financing for your small business to promote growth and job creation. These types of loans are a bit more complex, as they are provided through Certified Development Companies (CDCs), SBA partners who are certified and regulated by the government agency. 

These loans are meant to help with business growth and can be used to purchase or construct new buildings, facilities, or long-term machinery and equipment. They can also be used for improving existing facilities or land or for renovating property. 

A 504 loan cannot be used as working capital, to refinance or pay debt, or for speculation or investment in rental real estate. 

The SBA loan terms for this loan program vary, but in general, borrowers can get up to $5.5 million per project for up to three projects that don’t exceed $16.5 million. Loan repayment terms vary between 10, 20, and 25 years, while the interest rate is pegged to a current rate slightly above 10-year Treasury bonds. 

Who Qualifies for an SBA Loan? 

Whether you qualify for an SBA loan will depend on the loan program as well as the intermediary lender, as each program and SBA lender have separate qualifications. 

In general, though, small businesses need to meet the following eligibility requirements:

  • Have a business that operates in the U.S.

  • Meet the SBA’s definition of a small business

  • Be a for-profit business owned by U.S. citizens or legal residents

  • Be in good standing with the law

  • Demonstrate a purpose for the loan

  • Have any legally required licenses and permits 

You may also need to provide collateral, especially if financing an asset like real estate. In some cases, any assets you are financing will serve as the collateral. During your loan application, you may also be asked to include a personal guarantee. 

Finally, you will need to show that you have the ability to repay the loan through your business finances, creditworthiness, and cash flow. Both your business and personal credit score will determine the type of SBA loan terms you receive. Most lenders will also ask for your tax returns, and you may need to include a business plan.

What to Consider Before Getting an SBA Loan

There are a number of loan options you can apply for through the SBA, depending on your business needs. Make sure you understand the SBA loan terms before starting the application process for a small business loan. That includes the length of repayment as well as the interest rate. 

Before applying, make sure you determine the loan purpose. What do you need a loan for? That will help determine if you are eligible for certain types of SBA loan programs. 

Also keep in mind that SBA loans can take a while to get approved for, taking weeks or even months. If you need to get funding in a matter of days, SBA loans might not be a good solution. 

SBA Loan Alternatives 

There are other financing options besides getting an SBA loan. Depending on your business needs, you may also want to consider these other ways of getting a business loan. 

Alternative Lenders

Alternative lenders like Backd have an easy application process and can quickly provide funding. They are often easier to apply for and may not require collateral or even a high credit score. Alternative lenders often offer different types of financing, such as business lines of credit, working capital advances, or invoice factoring. 


Crowdfunding is another way to raise money for small businesses. With crowdfunding, you raise funds from a number of individuals, usually everyday people as opposed to institutional investors. 

With crowdfunding, you can ask for donations; provide a reward for giving money, such as a new product; or promise to repay contributors in the future.

Equity Financing

Another way to get funding for your small business is through equity. With equity financing, you sell ownership shares in your company in exchange for raising capital. As a business owner, you exchange a portion of your ownership in exchange for money from external investors. This can include venture capitalists or angel and seed investors. 

Before getting equity financing, it’s best to weigh the pros and cons, as it’s not for every business. 

Consider All of Your Funding Options 

Small business financing is an important factor in ensuring the growth of your company. SBA loan terms can be favorable for some businesses, but it’s important to keep in mind what your short-term and long-term financing goals are. Since SBA loans can take a while to qualify for, sometimes it makes sense to apply for other types of funding options. 

With Backd, you can get a business line of credit of up to $750,000 with unlimited terms and incredible interest rates. Or you can get a working capital advance for up to $2 million with no collateral required and term lengths of up to 16 months. 

Apply today, and find out if you qualify in just 24 hours.

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