How to Apply for an SBA Loan

Step 1: Decide which type of SBA loan you need.

There are several different types of SBA loans available to small businesses. With SBA loans, your business may be able to borrow up to $5 million and repay those loans over a period of 10 to 30 years. (Repayment terms can vary.)

You can find SBA loans to help you finance many different aspects of your business needs. Whether you need startup funding, working capital, equipment financing, inventory financing, or funding for some other type of business need, you may be able to find an SBA loan to support your goals. 

First, Ask yourself a few key questions about your business needs to find the right SBA loan program for your needs, like:

• How much funding do I need?
• What will I use the funding for?
• What is the minimum repayment term I need to work with?

Once you figure out the type of SBA loan you want, you can determine if your business is eligible for the loan program. 

Step 2: Check eligibility requirements

The specific eligibility requirements that your business needs to meet in order to qualify for an SBA loan will vary based on a few factors. First, each SBA loan program has unique requirements you must meet to qualify. In addition, you may need to satisfy additional loan requirements that your SBA-approved lender requires from small business borrowers. 

The minimum requirements for most SBA loans are as follows. 

• Be an operating business
• Operate for profit
• Be located in the U.S. or in U.S. territories
• Can meet SBA “small business” size requirements 
• Not be a type of ineligible business 
• Be creditworthy and demonstrate reasonable ability to repay the loan
• Collateral to secure a large percentage of the loan
• Unable to access business financing through non-government means (not including personal funds)

If you meet these requirements, then the next step is confirming that you qualify with an SBA lender, and this is where it can get complicated. Let’s go over some major eligibility requirements with most SBA-approved intermediary lenders as lender standards vary.

Creditworthiness Requirements

SBA 7(a) loans and SBA 504 loans are issued by traditional lenders, so they will have more stringent credit criteria than other loans, like microloans.

Most lenders for these loans will want to see a FICO® credit score of 650 or above.

On the other hand, SBA microloans have less strict credit criteria, and you may be able to qualify with limited credit history.

Time in Business Requirements

Like credit criteria, SBA 7(a) loans and SBA 504 loans will require more time in business and proof of revenue than microloans.

Most lenders will want to see at least two years in business for 7(a) and 504 loan applicants. In contrast, lenders may not require as much time in business for the microloan program, with some lenders only requiring six months in business.

If you meet these eligibility requirements, the next step is to gather all the documentation you will need for the application process.

Step 3: Prepare documentation for SBA loan application

Before you apply for an SBA loan, it’s important to gather the documentation your lender will request on your application. The time it takes to move through the SBA process from application to funding will vary.

While it might take 30 to 90 days with your local bank, Lendio, on average, can close an SBA 7(a) small loan in less than 30 days. Having your documents prepared ahead of time may help improve your chances of approval and could help you move forward through the SBA loan process at a faster pace.

Below is a list of the documents you should prepare for your SBA loan application:

• Six months of business bank statements (connect account or manually upload images)
• Copy of your driver’s license or state ID
• Voided check from your business account
• Month-to-date transactions
• Two years of business and personal tax returns (for all business principals with 20% or more ownership)
• Debt schedule
• Year-to-date profit and loss statement
• Year-to-date balance sheet
• Cash flow projections
• List of collateral
• Business certificates or licenses
• Loan application history
• Business owner resume(s)
• Business plan
• Business lease, if applicable

Additional SBA loan application requirements.

In addition to the documents listed above, you should be prepared to include more information on your SBA loan application. Details you may need to provide include: 

• The amount of money you want to borrow.
• The purpose of the loan and how you plan to use the proceeds if approved.
• Assets you need to purchase and the name of your business suppliers.
• When your business started.
• General information about your business (owners, affiliations, etc.).
• Your birthday and your Social Security number
• Details regarding other business debts and your creditors.

Anyone who owns 20% or more of the business will generally need to fill out an SBA loan application form, as the SBA requires that anyone with 20% or more ownership in the business provide an unlimited personal guarantee.

Owners with less than 20% ownership can provide full or limited guarantee. Owners will also need to complete a personal financial statement, called SBA Form 413. SBA uses the personal financial statement to assess risk and help determine an applicant’s ability to repay as promised. 

Here’s a list of SBA-specific forms to include in your application package:

• SBA Form 1919 – Borrower Information Form
• SBA Form 912 – Statement of Personal History
• SBA Form 413 – Personal Financial Statement
• SBA Form 148 – Unconditional Guarantee (or lender’s equivalent to this form.)
• SBA Form 148L – Limited Guarantee (or lender’s equivalent) for owners with less than 20% ownership

Step 4: Find an SBA-approved lender

You can use an SBA loan to support your small business in many different ways. Once you feel ready to begin your SBA loan application, you can start by choosing an SBA lender to guide you through the process. 

Depending on the type of SBA loan program you are applying for, you might have a few different options for finding an intermediary lender. Since SBA 7(a) loans and SBA 504 loans lenders are more traditional financial institutions, you can try reaching out to a bank you have a previous relationship with.

The SBA also offers a few resources for finding active certified development companies (cdcs) and active microlenders on their website.

If you would like to connect with lenders directly, you can use the SBA’s lender match system. You’ll fill out a questionnaire about your business, and in two days, you’ll receive an email with possible lender matches. 

Lendio offers a convenient SBA loan application process. Potential borrowers can complete an application and get a preapproval within 24 hours, and after providing the documentation listed above, can get funded with a 7(a) small loan in less than 30 days.

Step 5: Submit your SBA Loan Application Package

Once you’ve prepared your loan application package, it’s time to submit it to the lender. Don’t be surprised if they may follow up with questions, or request for additional documents. Every lender has different requirements, so work with your contact to provide everything they need to begin the initial underwriting process to review your application.

If your lender decides to move forward, you can expect a “loan proposal” or “letter of intent” to follow. This document will detail your request, loan terms, and deposits, fees and/ or closing details.

If you accept and sign the proposal, you’re not out of the woods yet. Your lender will begin a formal underwriting process, in which both the lender and the SBA review your application, documentation and credit history thoroughly.

If you are approved after this process, you will be notified and provided a letter of commitment. You must accept it in order to receive closing documents and start the closing process. Once everything is signed and the process is complete, your money will be disbursed.

What to do if your SBA Loan application is denied

Although it’s not the outcome you want, only about one-third of SBA loan applicants were fully approved in 2023. A decline is not uncommon, so knowing your options if this happens will help you plan for your next steps.

If your application is denied, your lender will provide you with a letter explaining the reason you were denied, and may provide some options for you after that. You may be able to appeal the decision, for example, and your lender can provide insight.
Read our guide on common reasons why your SBA loan application may have been declined, and what to do next.

Alternatives to SBA Loans

If you aren’t able to find a workaround in the event that your SBA loan was declined, or if you aren’t confident you meet the eligibility requirements, here are some other alternatives to consider:

• Equipment financing – if new equipment upgrades, repair or replacement is what you need, consider exploring term loans or leases for equipment.
• Term business loans – If you don’t qualify for an SBA loan, you may still be able to obtain a business loan paid off with equal payments at a fixed rate through other lenders.
• Business lines of credit – Opening a line of credit enables you access to funds that you can borrow anytime up to your credit limit.