Requirements for an SBA Loan

a woman working in a restaurant.

Getting a loan for your small business or startup can be quite a challenge, especially if it’s your first time. Most traditional banks and lenders might consider lending to you as too risky.

But what if you could get a loan that has a low-interest rate and that’s guaranteed partially by the U.S. government? These loans are called SBA loans, and we will be talking about them in this post. You’re going to learn what an SBA loan is and the requirements you need to meet to apply and get one. We will also cover the pros and cons of an SBA loan, along with anything else that you need to know.

Requirements for an SBA Loan

a boss smiling in an office with a blurred background.Before we dive into the requirements of an SBA loan, it’s worth mentioning what an SBA loan is,  it’s a government-backed loan available to small businesses and startups and issued through banks and private lenders. SBA loans come partially guaranteed by the government through the SBA (the U.S. Small business Administration).

SBA does not issue these loans directly to small businesses. They partner with banks and lenders and guarantee partial repayment if you fail to pay back the loan. They reduce the risk, which allows the lender to be more comfortable giving a loan to a small business or startup.

However, since SBA loans come backed by SBA, there are several rules and requirements that your business needs to meet to be eligible. The eligibility criteria may vary depending on the type of SBA loan you want.

To apply for an SBA loan, you should meet the following requirements:

Good Personal and Business Credit Score

Your personal credit score and business credit history can make a difference in whether you get an SBA loan or not. Most SBA lenders will want to know your creditworthiness before approving your loan. They may request you and other owners of your business to provide your social security numbers for a credit check.

Even though SBA does not set a specific credit score minimum, most lenders will want you to have 640 or more. Try and check your credit score before applying for the loan to avoid any issues or surprises.

The lender may also request to run a check on your FICO SBSS score or any other business credit score. They will want to know whether your business pays creditors, vendors, and suppliers on time. Strive to make on-time payments for all your expenses to build your business credit score.

Operating for Profit

SBA only guarantees loans to small businesses that operate for profit. Non-profit organizations are not eligible for the SBA loan. The EIDL and PPP COVID-19 relief programs were an exception to this requirement, but they expired in mid-2021.

Meet SBA’s Standard of a Small Business

Your business needs to satisfy SBA’s size standard of a small business for you to qualify for an SBA loan. SBA assesses a small business in terms of employee size and annual sales receipts.

The maximum number of employees depends on the industry, although the generally accepted number is 500 employees or less. In some industries, SBA allows a higher employee number.

SBA may also categorize your business as small if you have annual revenue between $750,000 and $5,500,000. But again, it depends on the industry. You can check your business size on if you are unsure whether you rank as a small business or not.

Located and Operating in the United States

SBA only grants loans to small businesses owned and operated in the U.S. Your business should have a U.S. mailing address and be located physically in the United States.

Operating in an SBA-Acceptable Industry

The industry your business operates in also matters when seeking an SBA loan. Some industries don’t qualify for a loan, for example:

  • The gambling industry – includes small companies whose source of income (more than a third) is gambling.
  • a young women in a warehouse.Businesses that make their money from lending and giving loans.
  • Religious institutions and charities.
  • Real estate investment companies.
  • Adult entertainment companies.
  • Companies that engage in multi-level marketing and pyramid schemes.
  • Non-profits and government-owned companies.
  • Companies that engage in lobbying and political activities.
  • Companies that offer life insurance services.

Exhausted Other Financing Opportunities

To qualify for an SBA loan, you need to demonstrate that you’re having trouble getting a traditional loan or funding from other financing opportunities. SBA won’t necessarily ask you for rejection letters, but your lender may have to document that you don’t have other funding options.

The Owners Should be Eligible

SBA assesses your criminal background before approving you to get an SBA loan. The assessment is, however, on a case-by-case basis. Not all crimes are grounds for disapproval. Here are the crimes that may lead to disqualification from acquiring an SBA loan:

  • Felonies
  • Crimes relating to financial dishonesty such as embezzlement.
  • Crimes of moral turpitude like murder, drug-related crimes, kidnapping, and child abuse.

two people making calculations on a note book and tablet.Owners that have defaulted on a government loan or federal funding program in the past may also not get an SBA loan. There are, however, exceptions to this rule. Just for clarification, an owner is somebody who owns more than 20% of the small business.

Apart from these general requirements, SBA lenders can also set additional eligibility rules. When applying for the SBA loan, check with your lender to see if they have any other requirements.

Some lenders might require you to have been in business for a particular number of years. Others may want to see your financial projections and how you plan to pay the loan back. Most lenders require that you be in business for two years or more. It, however, depends on the lender.

How to Get the SBA Loan

You now know the eligibility requirements for an SBA loan. In this section, we will cover how to apply and get an SBA loan. Here are the steps to follow:

1. Check Your Eligibility

The first thing you need to do before applying for a loan is to ensure you are eligible. As highlighted above, SBA has specific requirements that you need to meet to qualify. The lender may also have additional requirements.

2. Choose an SBA Loan Program

Your next task will be to choose an SBA loan that best fits your business needs. There are many SBA loan programs that you can select. Each program may have specific qualification requirements. Let’s briefly look at the most common SBA loan types.

  • SBA 504 Loans

This SBA loan is for borrowers who want to invest in fixed assets like real estate and long-term machinery. SBA offers a guarantee of up to $5 million, and the repayment period is 10 to 25 years.

Additional eligibility requirement for the SBA 504 loan is that your business should have a net worth of at most $15 million. You also need to have a net income of under $5 million accumulated in the two years before applying.

You cannot use the SBA 504 loan to repay debt or finance day-to-day operations of your business. You also cannot invest in rental real estate.

  • SBA Microloans

SBA microloans are short-term, and they are for starting and expanding your business. This loan has a maximum repayment term of six years.

Unlike the SBA 504, you can use the SBA microloan for your day-to-day operations. You can also buy inventory and other supplies for your business. SBA microloans have a guarantee of up to $50,000. You cannot use this loan to purchase real estate or repay existing debt.

  • SBA 7(a) Loans

The SBA 7(a) loan program is the most common of all SBA loan types. This loan program has a maximum guarantee of $5 million, which you can use as long-term and short-term working capital or purchase equipment and supplies with it. You can also use this loan to repay existing business debt.

3. Gather Your Documents

If you think you are eligible for an SBA loan, head to and select the loan program you want. Study the instructions to see the information and documents that you need to submit.

Below are a few documents that you may need to gather for your application:

  • Business license and tax return documents
  • Business plan
  • Financial statements (balance sheets, income statements, and cash flow statements)
  • Debt schedule of all your current debts
  • Collateral
  • Personal background statements (criminal records, addresses, and educational background)
  • Personal credit score
  • Business credit report
  • A document highlighting the use of the loan

4. Select a Lender

SBA Loan written on a black posted note.Next up, find a bank or private lender that participates in SBA loan programs. SBA has over 800 lenders in all states and territories in the United States.

It’s better to choose a lender who has experience dealing with SBA loans. When selecting a lender, ask about their requirements for your specific SBA loan program. Also, ask about their interest rates and fees.

SBA has a lender match tool that you can use to find a suitable lender for your business. All you will have to do is describe your business needs, and SBA will connect you to your ideal lender in two days. Once you find a lender, apply and submit your paperwork, then wait for the approval.

What Are the Pros and Cons of an SBA Loan?

Let’s look at the pros and cons of an SBA loan.

The Pros

  • Easy Access to Capital for Small Business

Startups and small businesses usually go through a tough time getting traditional loans because banks consider lending to them as too risky. With SBA loans, the lender is more willing to give a loan to small businesses. They are assured of repayment in case the business defaults.

  • Available Resource Centers for Assistance

There are many SBA resource centers that you can consult when applying for an SBA loan. You can go to your state’s Small Business Development Center (SBDC) or seek advice through SCORE. SCORE is a non-profit organization that helps businesses start and succeed. This organization is also a resource partner for the SBA.

  • Lower Down Payment Requirements

Most traditional loans require a down payment of 20% to 30%. The down payment for an SBA loan can be as low as 10%.

  • Longer Repayment Terms

SBA loans come with long repayment terms, which gives the borrower enough time to organize their business and repay in small monthly payments. Some SBA loans have a repayment term of 10 to 25 years.

Cons of an SBA Loan

  • Personal Liability if You Fail to Repay

SBA requires at least one owner in your business to sign a personal guarantee. This document authorizes the lender to claim your assets if you default on the SBA loan.

  • The Approval Process is Slow

Applying and waiting for approval of an SBA loan can take two to three months. This funding option may not be suitable for a business owner who needs quick cash unless they select the SBA Express program.

  • Collateral Required

Most SBA lenders require you to offer your assets as collateral in case you default.

  • Additional Documents and Paperwork Required

You need to confirm eligibility and gather a ton of paperwork to apply for an SBA loan.

What Is the Average SBA Loan Processing Time?

The total processing time for an SBA loan generally ranges from two to three months, depending on the loan size and the lender. Large loans may take longer to approve since they usually require many documents and verification processes.

Here is a brief outline of the entire SBA loan process:

  • Gathering documents and applying – one day to a month
  • Loan underwriting – 10 to 14 days
  • Loan approval and the sending of a commitment letter – 10 days to 3 weeks
  • The closing of the loan – 1 to 2 weeks.

For borrowers that need a quick SBA loan, SBA has a loan program called SBA Express. With this program, you can apply for a loan and get approval in less than 48 hours.

The maximum amount a borrower can get through the SBA Express is $500,000. You can use this loan to finance your business operations, purchase equipment, and repay existing business debt.

What Are the Chances of Approval for an SBA Loan?

The chances of getting an SBA loan are high if your business meets the eligibility criteria. This loan is easier to get compared to traditional loans because it carries less risk for the lender. The requirements and standards for an SBA loan are, however, higher compared to other funding options.

How to Use the SBA Loan Payment Calculator?

An SBA loan payment calculator works out the monthly payments you’ll be making if you get approved. It helps you determine the loan amount that you should take to ensure the payment terms are sustainable for your business. Most loan payment calculator tools are free. The details you will fill in the calculator tool include:

  • Loan amount
  • Repayment term (can be in months or years)
  • Interest rate (as a percentage)

Once you fill in this information, the payment calculator tool will determine your monthly payments in a matter of seconds.

Can I Get an SBA Loan Without a Personal Guarantee?

In a short answer, no. SBA requires at least one owner who owns more than 20% to sign a personal guarantee when applying for a standard SBA loan.

The lender is, however, free to request a personal guarantee from more than one owner. They can ask a partner with less than 20% ownership to sign a personal guarantee.

Can I Get an SBA Loan With Bad Credit?

It depends on the lender. Your credit score does matter when seeking an SBA loan, but it is not the only thing the lender assesses. The lender is the one to decide whether to give you an SBA loan or not if you have bad credit.

Some lenders may overlook your bad credit if they notice you’ve been in business for a decade or more. They may also be lenient if they learn that your low credit was due to a crisis you couldn’t control.

How do I Check My SBA Loan Status?

SBA Loans typed on a paper.Once you apply for an SBA loan, how do you know if you’ve been approved or denied? The fastest way to know your SBA loan status is through Once you log in to your SBA portal, check the status of your SBA loan there. You’ll get to know whether your application is denied, approved, or still pending. You can also reach out to SBA’s customer service at or through the number 1 (800) 827-5722.

Who Are the Top SBA Loan Lenders?

SBA has lenders in all states and territories of the United States. Narrowing down the number to the lenders that best fit your business can be challenging. The good news is that SBA offers a list of the most active SBA lenders. Here is a list of the top ten SBA loan lenders that you can go for:

  • ReadyCap Lending
  • Harvest Small Business Finance, LLC
  • Wells Fargo Bank
  • Byline Bank
  • Newtek Small Business Finance
  • Live Oak Banking Company
  • The Huntington National Bank
  • Keybank National Association
  • Celtic Bank Corporation
  • Commonwealth Business Bank

How to Modify an SBA Loan?

The process of modifying an SBA loan is more or less the same as any other loan modification. If you want to change the current terms of your SBA loan, you will apply for a loan modification through your lender. SBA encourages lenders to modify an SBA loan instead of foreclosing.

SBA also provides guidelines that the lender should follow to modify the SBA loan. Lenders should follow the procedures highlighted in SBA’s SOP manual and the 7(a) Matrix. They should also request SBA approval and obtain all the documents necessary for a loan modification.


SBA loans are an excellent financing opportunity for startups and small businesses that can’t get traditional loans. SBA guarantees payment of the loan in case the borrower defaults.

When applying for an SBA loan, you first need to confirm eligibility. Aside from meeting SBA’s definition of a small business, your business should also operate for profits, and it should have a physical and mailing address in the United States.

Your personal credit score and business credit history can make or break your success at getting an SBA loan. Most SBA lenders will request to check your FICO SBSS score and personal credit score before approving your loan. If you have any questions about your SBA loan, you can always reach out to an SBA resource partner in your area or call SBA’s customer service.


Below are a few sources that may come in handy to help you get the most from SBA loans.


A book about SBA loans is a great way to expand your knowledge. Furthermore, you have the freedom to read and study at your own pace, which is preferable to attending a class with a time restriction.

When I’m curious about a topic, I look for books and study the table of contents to get a synopsis and new ideas.

Take a look at the most recent Google search results for books about SBA loans.


Monitoring the news is another way to obtain information about SBA loans. Although your topic may not be on the evening news. You may find new articles by using Google news to display the most current results and archived news.

Click here to see the most recent SBA loans news from Google’s news search results.


YouTube is a fantastic source of knowledge on almost any subject. For example, in the time it would take to read a chapter of a book, you could watch ten short videos that provide different views and provide a broad view of the subject.

Click here to discover which videos on YouTube are relevant to SBA loans.