SBA Loan Requirements: What You Need To Know About Qualifying For SBA Loans
You can score a low-interest, long-term SBA loan if you meet all of the requirements. Here's what you need to know about qualifying for an SBA small business loan.
SBA loans provide long-term small business loan options with low interest rates. Because of the competitive rates and terms, there are a number of requirements that borrowers must meet in order to receive one of these loans.
Keep reading to learn more about SBA loan requirements to see if you qualify.
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What Is The SBA?
The Small Business Administration (SBA) is a federal agency that provides resources to support small business owners. In addition to educational materials and training, the SBA also provides low-cost, long-term loan options for businesses that struggle to find funding elsewhere.
How Do SBA Loans Work?
The SBA does not issue loans — this is done by third-party, SBA-approved lenders known as intermediaries. The SBA simply guarantees a portion of each loan, alleviating some of the risk put on the lender. With these guarantees, lenders feel more confident in funding small businesses.
The SBA also caps interest rates and has set repayment terms, ensuring that borrowers receive affordable loans, even after they’ve failed to qualify for other business loans. However, borrowers do have to meet a lengthy list of requirements and provide a significant amount of information and documentation to receive an SBA loan.
Basic SBA Loan Requirements
There are general requirements set by the SBA that all applicants must meet in order to receive a loan. There are also specific underwriting requirements by loan type that must be met. Here’s what to expect before applying for an SBA loan.
SBA Loan Requirements By Program
You may have to meet additional requirements set by the SBA or your lender. Here’s an idea of what to expect based on each SBA loan program.
SBA Loan Fees
The SBA requires lenders to pay guarantee fees, and this cost is often passed along to borrowers. Loans under the 7(a) program (including Standard 7(a) loans and Express loans) will pay a guarantee fee, as well as borrowers that receive a 504 loan.
Guarantee fees range from 0% to 3.75% and are based on the type of loan, borrowing amount, and term length.
In addition to guarantee fees, your lender may require you to pay other fees to receive your loan. This may include:
- Packaging fees
- Loan servicing fees
- Prepayment penalty fees
- Appraisal fees
- Title fees
- Attorney fees
Additional fees may apply. Your lender will explain all fees to you before you sign your loan documents.
SBA Loan Documentation Requirements
When applying for an SBA loan, you’ll need to provide documentation to show that you qualify for the loan. While documentation requirements vary, you should expect to provide these documents to your lender.
SBA Loan Requirements FAQs
The Bottom Line On SBA Loan Requirements
Once you’ve determined you qualify for an SBA loan, you can start the application process with an SBA-approved lender. You can use the SBA’s Lender Match tool, get a referral from your current financial institution, or use an online lender like SmartBiz that simplifies and expedites the process.
If you don’t qualify, there are other options available. Banks, credit unions, and alternative lenders provide small business loans, lines of credit, and other funding opportunities to help you grow your business. With a little research and comparison, you can find the option that’s right for you.