The U.S. Small Business Administration (SBA) does not lend money directly to borrowers.
37 steps across 10 sections
1. Determine Which Program Fits
- 7(a): Best for general business purposes, working capital, equipment, or business acquisition
- 504: Best for purchasing commercial real estate or major equipment
2. Find an SBA-Approved Lender
- Use the SBA Lender Match tool at sba.gov
- Work with an SBA Preferred Lender for faster processing (delegated authority to approve loans without SBA review)
- Small Business Development Centers (SBDCs) and SCORE mentors can provide free guidance
3. Lender Review and Underwriting
- Ability to repay (cash flow analysis)
- Owner equity and collateral
- Owner character and experience
- Strength of the business plan
4. SBA Review (if needed)
- Preferred Lenders: Can approve without SBA review (faster)
- Non-preferred lenders: Must submit to SBA for approval (adds 5-10 business days)
5. Financial Documents
- Business tax returns (2-3 years)
- Personal tax returns of all owners with 20%+ ownership (2-3 years)
- Year-end profit and loss statements and balance sheets (last 3 years)
- Current interim profit and loss statement (dated within 120 days of submission)
- Detailed debt schedule
- Business financial projections (for startups or expansion)
6. Business Documents
- Business plan (especially for startups)
- Business licenses and registrations
- Articles of incorporation or organization
- Commercial lease or property documentation
- Franchise agreement (if applicable)
- Buy-sell agreement (if acquiring a business)
7. Personal Documents
- Personal financial statement (SBA Form 413)
- Resume/management experience documentation
- Government-issued photo ID
8. 7(a) Interest Rates
- Variable rate loans: Tied to Prime Rate + spread
- Loans over $50,000 and up to 7 years: Prime + up to 2.25%
- Loans over $50,000 and 7+ years: Prime + up to 2.75%
- Loans $50,000 and under: Prime + up to 4.75%
- Fixed rate options available from some lenders
9. 504 Interest Rates
- Bank portion (50%): Negotiated with the bank
- SBA/CDC portion (40%): Fixed rate, typically below market, tied to 5-year and 10-year Treasury rates
- Effective blended rate is usually very competitive
10. SBA Guarantee Fees
- Loans up to $1 million: 0% to 2% of guaranteed portion
- Loans over $1 million: Up to 3.5% of guaranteed portion
- Annual servicing fee: 0.55% of outstanding guaranteed balance
Common Mistakes
- Incomplete application packages
- Poor credit history
- Insufficient cash flow
- No collateral plan
- Not shopping lenders