Six Types of SBA Loans: A Comprehensive Overview

Finding the right funding for your small business may feel overwhelming. The good news? Understanding your options makes the process much easier. This article walks you through the six types of SBA loans available to help your business thrive.

What is an SBA loan?

SBA loans are small business loans backed by the U.S. Small Business Administration (SBA). While banks generally issue these loans, the SBA guarantees a portion of the funding. This arrangement creates a safety net for lenders. If you experience difficulty with repayment, the SBA steps in to help the bank recover unpaid funds. This lower-risk approach encourages banks to provide loans to qualified small business owners who might not otherwise receive funding.

The six types of SBA loans

Let's explore the six most common SBA loan programs available to small business owners.

1. SBA 7(a) loans

Many consider SBA 7(a) loans the most business-friendly financing option available—not just among SBA programs but also compared to conventional loans.

Overview:

Small business owners typically choose SBA 7(a) loans for working capital, debt refinancing, or commercial real estate purchases. These loans offer competitive interest rates and extended repayment terms. You may select either fixed or variable interest rates, with variable rates potentially saving you money long-term since SBA 7(a) loans are fully amortizing. This structure means you only pay interest on your remaining principal, not the original loan amount.

Key rates and figures for SBA 7(a) loans 

Interest Rates: Visit SBA rates and fees for more information

Repayment terms: 10 years for most loans, with commercial real estate loans extending to 25 years

Minimum requirements for SBA 7(a) generally include

• Credit score of at least 680 (at least 675 for commercial real estate loans)
• 10% to 20% down payment (potentially higher for startups)
• Collateral
• At least two years in business
• U.S.-based, with U.S. citizen ownership
• Owner at least 21 years old
• No outstanding tax liens
• No recent charge-offs or settlements
• No foreclosures or bankruptcies in the last 3 years
• Current on all government loans

Who it's best for:

SBA 7(a) loans work well for established businesses that meet the qualification criteria and need flexible funding for various business purposes.

How to apply for SBA 7(a) loan

The SBA 7(a) loan application process requires thorough documentation. To prepare, gather your accounting and tax paperwork, including personal and business tax returns, personal financial statements, balance sheets, profit and loss statements, and collateral documents.

Connect with SmartBiz to streamline your application process—we don't require a business plan, saving you valuable time.

2. SBA 504 loans

The SBA 504 program lightens your financial commitment through partnerships with community development corporations (CDCs). These loans generally work especially well for commercial real estate purchases that benefit your local community.

Overview:

SBA 504 loans provide excellent options for commercial real estate purchases, equipment acquisitions, or facility modernizations. The structure typically involves an issuing bank covering 50% of the total, with your local CDC covering 40%. This arrangement leaves you with just a 10% down payment initially. Your loan comprises the remaining 90%, which you'll repay according to the established terms.

Key rates and figures for SBA 504 loans

Interest rates: Based on an increment above the current market rate for 10-year Treasury notes

Loan amounts: $125,000 to $5.5 million 

Repayment terms: 10, 20, or 25 years

Minimum requirements for SBA 504 generally include

• U.S.-based for-profit business
• Tangible net worth under $15 million
• Average post-tax net income under $5 million for the two years prior to application
• Business size within SBA guidelines
• Qualified management expertise
• Ability to repay the loan based on cash flow
• Feasible business plan
• Non-passive, non-speculative business activities

Who it's best for:

SBA 504 loans serve qualifying businesses whose commercial real estate or equipment purchases align with their local CDC's community development goals.

How to apply for SBA 504 loans

The application process for an SBA 504 loan resembles the SBA 7(a) process, but it requires additional documentation related to your real estate or equipment purchase.

3. SBA CAPLines

The SBA offers specialized financing for short-term and cyclical working capital needs. These CAPLines programs serve four categories of borrowers, with options for business lines of credit, revolving loans, or installment loans.

Overview:

The SBA CAPlines program includes four financing options:

• Contract loans. Contractors or subcontractors with a history of successful similar projects may apply for project funding. The loan proceeds may cover contract costs, subcontract expenses, or related purchase orders.
• Builders lines. Construction contractors or homebuilders with at least one supervisory employee on-site during construction may qualify. These loans cover direct construction or renovation costs exceeding the fair market value or one-third of the property purchase price.
• Seasonal lines of credit. Businesses demonstrating clear seasonal activity patterns may access this SBA line of credit. Funds typically support seasonal increases in inventory or accounts receivable.
• Working capital lines of credit. Businesses generating accounts receivable or maintaining inventory may qualify. Proceeds generally support short-term operational and working capital requirements.

Key rates and figures for SBA CAPlines

Loan amounts: Up to $5 million

Repayment terms: Builders CAPlines must not exceed 60 months plus construction time; 10 years for all other loan types

Minimum requirements: Similar to SBA 7(a) loans, plus the specific criteria mentioned above

Who it's best for:

SBA CAPLines work well for contractors, subcontractors, seasonal businesses, construction companies, and homebuilders. They also serve businesses with inventory or accounts receivable, particularly those needing short-term, cyclical capital.

How to apply for SBA CAPlines

The application process mirrors the SBA 7(a) loan process. Many businesses receive CAPLines as attachments to SBA 7(a) or 504 loans, though businesses with strong financials may qualify for standalone CAPLines.

4. SBA Export loans

According to the SBA, 70 percent of U.S. exporting companies employ fewer than 20 people. The SBA's three export loan programs help these small exporters—and slightly larger ones—expand or develop their operations. These programs also support entrepreneurs launching new export businesses.

Overview:

The SBA Export Loans program consists of three options:

Export Express Program. This program provides small exporters with application decisions within 36 hours for funding up to $500,000. Proceeds support activities developing the business's exporting capabilities, available as either a line of credit or an installment loan.

Export Working Capital Program (EWCP). The EWCP provides exporters up to $5 million as a credit enhancement. This support helps exporters access traditional financing options and strengthens their position when negotiating export payment terms.

International Trade Loan Program. This program serves exporters affected by import competition or those developing new markets or expanding existing ones. Recipients may use proceeds to acquire, construct, renovate, modernize, improve, or expand assets and operations. The program also allows for debt refinancing.

Key rates and figures for SBA Export Loans

Interest rates: 

Export Express

EWCP

International Trade

Loan amounts:

• Export Express: Up to $500,000
• EWCP: Up to $5 million
• International Trade: Up to $5 million

Repayment terms:

• Export Express: Up to seven years for lines of credit; 10 to 25 years for installment loans
• EWCP: Typically one year, with extensions possible up to three years
• International Trade: 10 to 25 years

Minimum requirements generally include:

• Credit score of at least 680
• Export-related current or planned services
• For Export Express, at least one year in business

Who it's best for:

SBA Export Loans support small businesses currently exporting goods or planning to do so. They also assist entrepreneurs launching or recently launching export-focused businesses.

How to apply for SBA Export Loans

The SBA recommends working with banks participating in the Export Loans program.

5. SBA Microloans

Sometimes your business needs a smaller amount of funding. When you need around $10,000 rather than millions, a microloan provides a more appropriate solution. These loans are so small that the SBA doesn't guarantee them.

Overview:

Think of SBA microloans as compact versions of SBA 7(a) loans. They offer similar advantages—competitive interest rates, reasonable repayment terms, and versatile uses—but at a smaller scale. Proceeds typically support working capital, fixtures, furniture, inventory, supplies, equipment, or machinery.

Key rates and figures for SBA Microloans

Interest rates: Generally between 8%-13%

Loan amounts: Up to $50,000, though the average is closer to $13,000

Repayment terms: Maximum of six years

Minimum requirements generally include:

• Credit score of 620 to 640 or higher
• Collateral or personal guarantee

Who it's best for:

SBA microloans serve small businesses needing modest capital for working capital, inventory, equipment, supplies, or furniture.

How to apply for SBA Microloans

Apply for SBA microloans through an SBA-approved intermediary. 

6. SBA Disaster loans

Even the best planning can't anticipate every challenge. When unexpected events disrupt your business, SBA disaster loans—issued directly by the SBA rather than through banks—provide recovery support.

Overview:

SBA disaster loans cover property damage, asset repair, or replacement following a disaster. They also support operating expenses you could have managed without the disaster's impact. These loans cover costs not addressed by your insurance or Federal Emergency Management Agency (FEMA) assistance. A specialized category, military reservist loans, covers operating expenses affected by employees on active military leave.

These loans also address economic disasters.

Key rates and figures of SBA Disaster loans

Interest rates: Can vary but typically not to exceed 4%

Loan amounts: Up to $2 million

Repayment terms: Up to 30 years

Minimum requirements generally include:

• Credit score of at least 575 for loans up to $500,000; 625 for larger amounts
• Business located in a declared SBA disaster zone
• Physical or economic damage resulting from a disaster
• For military reservist loans, an essential employee called to active military duty
• Collateral of at least $25,000 (at least $50,000 for reservist loans)

Who it's best for:

SBA disaster loans help small business owners recover from physical or economic disasters affecting their property and assets. They also support employers temporarily or permanently losing essential employees to active military duty.

How to apply for SBA Disaster Loans

First, verify the SBA has declared your location a disaster site. Then submit your disaster loan application and monitor your account for updates.

Finding your path forward with SBA loans

Every business journey has its challenges and opportunities. The right SBA loan provides not just funding, but the breathing room you need to focus on what matters most – growing your business and pursuing your vision.

Whether you're looking to expand, purchase equipment, hire new talent, or simply maintain healthy cash flow during seasonal fluctuations, an SBA loan program exists to support your specific needs.