Skip to content

SBA Loan

Loan Amount

$5 Million

Loan Term

10-30 Years

Time to Funds

Interest Rate


What is SBA Loan and How Does it Actually Work?

An SBA loan is any loan guaranteed by the U.S. Small Business Administration (SBA). They come in quite a few flavors designed to finance a variety of small business needs, but all of the different SBA loans have a few key things in common. For small business owners, the most important thing to know is that SBA loans offer some of the lowest rates and best financing terms available. Lenders aren’t just generous when they issue SBA loans. Between 75% to 90% of these loans are backed by the federal government, which means lenders are taking on substantially less risk by originating these loans instead of more traditional financing. Without as much risk, lenders can pass on more attractive terms to the borrower.

Why would a government entity guarantee the loans of small businesses in the private sector? Because small businesses are a major pillar of the U.S. economy. Research from the SBA’s Office of Advocacy indicates that small businesses employ some 60.6 million people, or more than 47% of the nation’s workforce, while contributing about 44% of our country’s GDP. The SBA’s mission is to help Americans start and grow the businesses that contribute so much to our economic engine, and business financing is a critical component of that undertaking.

So, is an SBA Loan a good idea for your business? Read on to help you decide.

How can small business owners benefit from an SBA loan?

SBA loans range in term from 10-30 years, and those extended terms allow you to pay less each month than you might with a product such as a Business Term Loan or a Business Line of Credit. With the federal government guaranteeing a significant portion of the total loan amount, lenders will let you borrow as much as $5 million with an SBA loan at some of the most competitive rates you’ll see in business financing.

Of course, the longer term length, higher borrowing limit, and attractive rates all mean that business owners applying for an SBA loan can expect to be scrutinized. You’ll need to bring a significant amount of documentation to the table, including your personal and business tax returns, a personal financial statement, your one-year cashflow projection, and more.

Is an SBA loan the best source of financing for your business? It could be, if:

  • You meet the necessary lending qualifications.
  • You need to fund a large purchase and pay it back over a longer amount of time.
  • You want access to the best interest rates available and don’t mind waiting an extended period for approval and funding.

Maybe the pandemic dealt a blow to your business, and now that the Paycheck Protection Program (PPP) has expired, you need an alternative source of funding to get back on your feet and meet renewed demand. Or maybe you’re looking to purchase a competitor to expand your operation, but you have special requirements that mean you can’t qualify for a traditional Business Acquisition Loan. In these situations, an SBA loan could be just the ticket.

Should you consider other financing options that aren’t guaranteed by the SBA? Absolutely, if:

  • You can’t qualify for an SBA loan or your business doesn’t meet eligibility requirements.
  • You need funding quickly to make a time-sensitive purchase, acquisition, or investment, in which case Accounts Receivable Financing, a Business Line of Credit, or a Merchant Cash Advance might be better options.
  • You want a short-term loan that you’ll pay off in just a few years instead of over a decade or more.

Maybe you want to finance the purchase of equipment that you expect to use for the next five years. The drawn-out terms of an SBA loan would present you with lower monthly payments, but you would also be paying for your equipment long after it was past its useful life. SBA loans can also pose a problem when you have to move quickly to secure an opportunity, and the application and approval process might have you waiting for months to receive your money.

Qualifications for an SBA loan

Annual Revenue


Minimum Credit Score


Time in Business

Over 2 Years

How to qualify for an SBA loan

Qualifying for an SBA loan isn’t necessarily easy, but the basic SBA loan eligibility requirements are relatively straightforward. As long as your company is for-profit and doing business (or planning to do business) in the U.S., you’re halfway there. In addition, as the owner, you’ll need to have some equity invested in the business, and you’ll need to use traditional loans and your own assets before looking for financial assistance from the SBA. If your business is eligible and you decide an SBA loan is right for you, it’s time to take the next steps.

You can start by filling out Lendesca’s loan application, which allows us to do the work of determining your qualification, but you can also turn to the SBA’s loan application checklist to make sure you have all the documentation ready ahead of time.

Pros and cons of an SBA loan.

Getting an SBA loan can open up quite a few doors for a growing small business, but like any financing option, it comes with a few pros and cons you’ll need to consider:


  • SBA loans offer some of the best financing terms available to small businesses.
  • You can adjust repayment terms to meet your specific criteria, whether it’s a short-term need or you plan to repay over several years.
  • SBA loans have lower fees than many other loan options, and you can borrow a greater amount (up to $5 million).


  • SBA loans require more extensive documentation than some other financing options.
  • The qualification process means it can take one or two months to fund an SBA loan, so these programs aren’t a good fit if you have a more urgent need.
  • SBA loans have longer terms than many other options, so you’ll be paying the loan off for an extended period. Prepayment is possible, but it can come with penalties of up to 5% of the prepayment amount.

Our take on an SBA loan

It’s a potentially $5 million question: Is an SBA loan right for my business? That’s up to you. In our opinion, SBA loans are competitive for a reason—or rather, several reasons. Longer terms, great rates, and a $5 million ceiling allow you to finance significant business investments with an SBA loan, whether it’s a real estate purchase, a strategic acquisition, or a new franchise location that will help propel your operation to new heights. If you have the luxury of time and can sit through a lengthier application process, an SBA loan could be exactly what you need to achieve your growth goals.