SBA Loans
Definition
SBA loans are business loans partially guaranteed by the U.S. Small Business Administration, reducing risk for lenders and enabling more favorable terms for borrowers. The SBA does not lend directly — it guarantees a portion (typically 75–85%) of loans made by approved lenders. Major SBA loan programs include: 7(a) loans (up to $5 million for general business purposes), 504 loans (for real estate and large equipment purchases), and Microloans (up to $50,000 for startups and small businesses). SBA loans typically offer the lowest interest rates (Prime + 2–3%), longest terms (up to 25 years for real estate), and smallest down payments available in business lending.
Example
A bakery applies for an SBA 7(a) loan of $350,000 to open a second location. With the SBA guaranteeing 75% of the loan, the bank approves it at Prime + 2.75% with a 10-year term. Monthly payments are $4,100 — significantly less than the $6,500/month a conventional loan would require.
Related Terms
Bridge Loan
A bridge loan is a short-term financing solution designed to 'bridge' the gap between an immediate c...
Debt Service Coverage Ratio (DSCR)
The Debt Service Coverage Ratio (DSCR) is a financial metric that measures a business's ability to s...
Working Capital
Working capital is the difference between a business's current assets (cash, accounts receivable, in...
Ready to Get Funded?
Apply in 60 seconds. Get matched with the best funding options for your business. No obligation, no impact to your credit.