SBA Loan Types:

  • SBA 7(a) Loan
  • SBA CDC/ 504 Loan
  • SBA CAPLine
  • SBA Export Loan
  • SBA Microloan
  • SBA Disaster Loan

SBA Definitions:

  • SBA 7 (a) Loan

    SBA 7(a) loans are the most common type of SBA loan. These loans go up to $5 million and can be used for working capital, to refinance debt or to buy a business, real estate or equipment. Two popular loans, the SBA Express Loan and SBA Advantage Loan, are part of the 7(a) loan program.

    SBA 7(a) loans are right for most businesses looking to finance their working capital needs. These loans are what most people are referring to when they ask about SBA loans and can be used for almost any business purpose. SBA loans are popular because of their long repayment terms and low interest rates, which make 7(a) loans one of the most affordable working capital solutions.

    SBA 7(a) Loan Interest Rates & Terms
    SBA 7(a) loans offer a variety of programs you can utilize that have a variety of uses. All of the rates and terms are similar, with small variations, such as the amount you can borrow.

     

    Let’s take a look at typical SBA 7(a) costs and terms:

    SBA 7(a) Loan Rates
    The typical SBA 7(a) loan interest rates and fees are:

     

    Interest rates: 2.25% – 4.75% + prime rate, typically 5% to 10%
    Origination fee: 0.5 – 3.5%
    Loan packaging fee: $2,000 – $4,000
    SBA guarantee fee: 2% – 3.5%
    The SBA 7(a) loan rates depend on a variety of factors, such as your credit score and the length of the repayment term, and it could be fixed or variable. The SBA limits the rate that lenders can charge for an SBA 7(a) loan with a maximum rate set at 2.25% to 4.75% plus the prime rate (Currently 5.25% as of 11/26/2018) .

     

    SBA 7(a) Loan Terms
    The typical SBA 7(a) loan terms are:

     

    Loan amount: Up to $5 million
    Repayment terms: Up to 10 years – 25 years for commercial real estate
    Repayment cycle: Monthly
    Time to funding: 30 – 90+ days
    While the SBA does not set a minimum loan amount, most lenders will not consider loans that are less than $30,000. You can try out our SBA loan calculator to estimate what your monthly payments would be with an SBA 7(a) loan, depending on the loan amount and repayment term you’re targeting.

     

    SBA 7(a) Loan Requirements

    SBA 7(a) loans are available to both startups and more established small businesses and have a variety of eligibility requirements. These SBA loan eligibility requirements include being a small business located in the United States able to demonstrate the need for the loan proceeds as well as your industry and the citizenship status of your owners.

    To qualify for an SBA 7(a) loan, you will generally need to meet these minimum requirements:

    Credit score: 680+
    Other requirements: No recent bankruptcies, foreclosures or tax liens
    Collateral: While the SBA will not refuse to guarantee a loan due to insufficient collateral, a lender is less likely to approve a loan that isn’t backed by sufficient collateral; loans of less than $25,000 don’t need to be backed by collateral.
    Down payment: 10%+ down payment if you are using the loan to purchase a business, commercial real estate or equipment
    Startups seeking an SBA loan will need to meet the above requirements, plus they should have:

    Demonstrated experience: Startups need to show the lender they have sufficient industry or business management experience and provide a strong business plan; your business plan will need to have a detailed written analysis, and you’ll need to also to provide financial projections for your business’s performance over the next 3 to 5 years
    Larger down payment: Perhaps the largest hurdle for startups is that most SBA lenders will require an equity injection or down payment of at least a 20% to 30% of your total project costs, or $20 to $30 for every $100 you want to borrow
    Excellent credit: In our experience, it is very difficult for anyone other than the best borrowers — 700+ credit score, high net worth and real estate with significant equity — to get approved for an SBA loan as a startup.

    If you’ve been in business for 2 or more years, have a 680-plus credit score and are profitable, then you could qualify for an SBA 7(a) loan.

  • CDC/SBA 504 LOAN

    The CDC/SBA 504 loan program provides SBA loans to small businesses looking to buy or build owner-occupied commercial real estate. The program pairs two lenders together to fund these projects, a bank or traditional lender and a CDC. The bank lends up to 50 percent, and the CDC lends up to 40 percent while the remaining 10 percent of the project’s costs come from the borrower, typically in the form of a cash down payment.

    CDC/SBA 504 loans require that the business occupy at least 51 percent of the commercial space. While this is a great opportunity to rent out 49 percent of your new building to tenants, it’s only right for companies that actually expect to occupy the space themselves. It’s also only right for small U.S. businesses that meet the SBA’s basic eligibility requirements, such as being for-profit.

    CDC/SBA 504 Loan Interest Rates & Terms

    The two loans involved in the 504 loan process will have different rates, terms, fees and limits. Combined, these rates will make up your total SBA/CDC 504 loan rates. Generally, you’ll pay a total of 4 percent to 6 percent interest on your entire loan with repayment terms as long as 25 years.

    CDC Portion of the SBA 504 Loan

    The CDC loan can cover up to 40 percent of the total project cost, and the SBA sets limits on the interest rates, terms and fees given by the CDC. The loans must have terms of 10 or 20 years and the interest rates generally look like this:

    • Current 10-year CDC loans: ~5.04%, fixed
    • Current 20-year CDC loans: ~5.32%, fixed

    The interest rate is pegged to 5-year and 10-year U.S. Treasury rate with 10-year term loans, adding .38 percent to a 5-year treasury and 20-year term loans adding .48 percent to a 10-year treasury. In addition, there are ongoing fees.

    Bank/Nonbank Lender Portion of the SBA 504 Loan
    The SBA does not set limits on the rates, terms and fees for the traditional lenders, which leaves the details of the loan up for negotiation. In general, interest rates will be between 5 percent and 9.75 percent and will have a reset point. Typically, the loan will have a 5- to 10-year term but will be amortized over 20 to 25 years.

    The combined maximum loan size for a project is $14 million. However, while there is a limit on how much can be loaned per project, borrowers can take out multiple SBA 504 loans at the same time for different projects. This raises the maximum amount to $20 million.

    CDC/SBA 504 Loan Requirements
    To qualify for a CDC/SBA 504 loan, your business must meet these minimum requirements:

     

    Credit score: 680+
    Down payment: 10%+ of the project cost
    Additionally, you’ll be required not to have the needed funds available from other sources, not be engaged in the investment of rental real estate and you’ll need to meet these other requirements:

    • Have a tangible net worth less than $15 million
    • Be able to repay the loan on time from the projected operating cash flow of the business
    • Building must be 51%+ owner-occupied
  • SBA CAPLine Loan Program

    SBA CAPLines Loan Types

    In summary, the SBA has four lines of credit that are meant to help businesses with their unique short-term and seasonal or cyclical working capital needs. The SBA CAPLines programs are for seasonal, contract, builder and working capital purposes. Through an SBA line of credit, businesses can get up to $5 million in financing that may otherwise be difficult to access.

    The four types of SBA CAPLines are:

    1. SBA Seasonal Line of Credit Loan Program

    A seasonal CAPLines is an SBA line of credit up to $5 million that can be used for seasonal increases in accounts receivable, inventory needs or related increased labor costs. To qualify, in addition to the standard 7(a) requirements your business needs to have been in operation for one or more years, and you need to demonstrate a pattern of seasonal activity.

    2. SBA Contract Line of Credit Loan Program

    A contract CAPLine is an SBA line of credit up to $5 million that can be used for the materials and labor associated with assignable contracts. To qualify, in addition to the standard 7(a) requirements, your business needs have demonstrated experience, profitability and ability to perform the work and complete the designated contract, subcontract or purchase order.

    3. SBA Builders Line of Credit Loan Program

    A builders CAPLine is an SBA line of credit up to $5 million for contractors and home builders who build or renovate residential or commercial buildings. To qualify, in addition to the standard 7(a) requirements, your business needs have demonstrated experience demonstrated experience, profitability and ability to perform the work and complete the project.

    4. SBA Working Capital (Asset-Based) Line of Credit Loan Program

    A working Capital CAPLine is an SBA line of credit up to $5 million that allows small businesses to convert short-term assets like pending invoices into cash. To qualify, in addition to the standard 7(a) requirements, your business must generate accounts receivable and/or have inventory. The working capital CAPLine provides financing that might not otherwise be available.

  • SBA Export Loans

    Export loans are SBA loans up to $5 million designed to help American small businesses expand their export activities, engage in international transactions and enter new foreign markets. They’re best for businesses engaging in international business and growing their businesses in those areas.

    SBA Export Loan Interest Rates & Terms

    The SBA Export loan interest rates and terms vary based on the type of export loan you choose. You can qualify for rates as low as 6 percent and terms as long as 25 years. The SBA Export loans have the largest range of terms and costs of any type of SBA loan.

    Let’s take a look at typical SBA Export loan costs and terms:

    SBA Export Loan Rates

    SBA Export Working Capital loans do not have an SBA restriction on maximum interest rate. While this means the rate could be very high, in practice the rates are usually in the range of 6 to 10 percent. The rates for SBA Export Express loans match the Express loan program (9.75 to 11.75 percent), and the rates for International Trade loans match the SBA 7(a) loan program (7.50 to 10.00 percent).

    The typical SBA Export Working Capital loan rates and fees are:

    Interest rates: 6 – 10% (no SBA limit but monitored for reasonableness)
    Origination fee: 0.5 – 3.5%
    Loan packaging fee: $2,000 – $4,000
    SBA guarantee fee: 2 – 3.5%
    SBA Export Loan Terms
    SBA Export loans typically feature the following terms:

    Loan Amount: Up to $5 million ($500,000 for Export Express loans)
    Repayment terms: Up to 3 years for Export Working Capital loans, 7 years for Export Express lines of credit and the same as 7(a) loans (10 to 25 years) for International Trade loans and Export Express term loans
    Repayment cycle: Monthly
    Time to funding: 30 – 90+ days
    SBA Export Loan Requirements
    Qualifications for an SBA Export loans for working capital closely resemble the requirements for an SBA 7(a) loan with a few variations based on which SBA Export loan you get.

    In general, you’ll need:

    Credit score: 680+
    Collateral: Short-term collateral like invoices or project contracts
    Personal guarantee: 20%+ guaranteed by owners
    Other requirements: No recent bankruptcies, foreclosures or tax liens
    In addition, the Export Express loan requires businesses be at least one year old and export products overseas. You don’t necessarily have to have a year’s history in exporting so long as your principles can show significant experience exporting.

    The SBA International Trade loan program requires you to show that you can develop new foreign markets, expand existing foreign markets or that your small business was affected adversely by imports and that the loan will increase your competitiveness.

    SBA Export Loan Types

    In summary, the SBA has three export loan types that provide businesses with export working capital and international trade financing. With SBA financing, businesses can get funding that may not otherwise be available from a traditional loan or other sources. The three SBA export loan programs are Export Express, Export Working Capital and International Trade.

    The three types of SBA Export loans are:

    1. SBA Export Express Loan

    The SBA Export Express loan program offers streamlined funding up to $500,000 in working capital to promote small businesses with export activities. The simplified application process and the quick approval turnaround time make this loan appealing for export businesses needing smaller funding amounts.

    The typical SBA Export Express loan rates and terms are:

    Loan Amount: Up to $500,000
    Interest rates: 9.75 -11.75%
    Terms: Up to 7 years for a line of credit; same as 7(a) for term loans (10 – 25 years)

    2. SBA Export Working Capital Loan

    The SBA Export Working Capital loan program provides funding up to $5 million in working capital. These funds can be used to finance export transactions when the small business has a purchase order from a foreign customer. It can also be used for letters of credit and for working capital when the payment cycle is long.

    The typical SBA Export Working Capital loan rates and terms are:

    Loan amount: Up to $5 million
    Interest rates: 6 – 10% (no SBA limit but monitored for reasonableness)
    Terms: Up to 3 years (12 months typical)

    3. SBA International Trade Loan Program

    The SBA International Trade loan program provides financing up to $5 million to small businesses that want to enter or expand into international markets. The eligibility and qualifications for the International Trade program generally mirror those of the SBA 7(a) loan program.

    The typical SBA International Trade loan rates and terms are:

    Loan amount: Up to $5 million
    Interest rates: 7.50 – 10.00%, same as SBA 7(a)
    Terms: Up to 10 – 25 years, same as SBA 7(a)

  • SBA Microloan Program

    The SBA Microloan program provides SBA loans to nonprofit intermediary lenders that, in turn, lend amounts under $50,000 to for-profit small businesses and nonprofit child care centers. The SBA does not guarantee any portion of the loans made under the SBA Microloan program. Microloans have terms up to 6 years, and the average size is about $13,000. The nonprofit intermediaries can borrow up to $750,000 from the SBA in its first year and up to $1.25 million each year after that but can have no more the $5 million borrowed at any one time.

    The rates and terms of SBA Microloans are similar to those with most peer-to-peer loans. However, peer-to-peer loans can be approved in minutes without much paperwork whereas SBA Microloans can take months to get approved and require extensive documentation.

    SBA Microloan Requirements

    SBA Microloan qualifications will vary from intermediary to intermediary. Unlike most of the SBA loan programs, the SBA leaves qualifications up to the intermediary, which sets all eligibility requirements and makes all credit decisions.

    The basic requirements to qualify for an SBA Microloan are:

    Credit score: 640+
    Collateral: Some required, but the amount varies by lender.
    Personal guarantee: Required
    The intermediary lender in the SBA microloan program has a little more flexibility in determining your creditworthiness than large lending institutions. However, they still need to feel extremely confident in your ability to repay the loan.