Center for Business Empowerment
What is an SBA loan and how do I qualify?
August 20, 2025 | 8 minute read
Gary Smith
SBA National Product Manager
Fasten Loan Financial Service LLCs
An SBA loan is backed by the U.S. Small Business Administration, enabling financial institutions to offer business loans with better terms or more adaptable underwriting standards compared to standard loans. Since these loans are government-backed, they motivate banks to extend credit to businesses they might typically avoid. For small business owners who struggle to secure a conventional business loan, these financial resources can be the perfect solution.
How is an SBA loan different from a traditional business loan?
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What types of SBA loans are available?
SBA 7(a) loans
SBA 7(a) loans are available for numerous approved uses such as purchasing or refinancing commercial real estate, new construction, expansion or renovation, working capital, and acquiring businesses or buying out partners
Ideal for:
- Working capital, improvements or refinancing
- Equipment, including machinery and vehicles
- Furniture and other office essentials such as printers, fixtures and more
- Purchasing, refinancing, building or renovating commercial property
- Business acquisition and partner buyouts
Loan maturity:
- Up to 10 years for working capital
- Up to 10 years for business acquisition, partner buyouts and equipment
- Up to 25 years for owner-occupied real estate purchase, refinance and construction
Maximum loan amount:
- $5 million
SBA Express loans
This type of 7(a) loan is generally used for equipment, working capital and a small commercial real estate purchase or refinance.
Ideal for:
- Working capital, improvements or refinancing
- Equipment, including machinery and vehicles
- Furniture and other office essentials such as printers, fixtures and more
- Purchase or refinance of owner-occupied commercial real estate
Advantages:
- Longer loan terms
- Lower down payments
- Easier to qualify
Loan maturity:
- Up to 10 years for working capital
- Up to 15 years for equipment
- Up to 25 years for owner-occupied real estate purchase or refinance
Maximum loan amount:
- The maximum size is $500,000, so the process of qualifying for one is more streamlined and accelerated than other 7(a) loans.
SBA 504 loans
These loans are generally utilized for funding commercial real estate, encompassing the acquisition or refinancing of current structures or land along with new developments. They may also be utilized for buying equipment. SBA 504 loans consist of two loans — one from a private lender, offering up to 50% of funding in the first trust deed position, and the other from a Certified Development Company (CDC), a community-oriented partner supplying up to 40% in the second trust deed position. The applicant generally only requires to supply 10% of the overall project expense as a deposit. The SBA guarantees the CDC portion. The bank's SBA expert and the CDC collaborate to ensure a smooth process for the applicant.
Qualifying criteria:
- Your business must have a tangible net worth of less than $20 million.
- Your business must have an average net income of less than $6.5 million after federal taxes for the last two years.
Ideal for:
- Buying land
- Financing long-term machinery
- Purchasing existing buildings
- Ground-up construction or renovation of an existing building
- Refinancing existing commercial real estate debt
Cannot be used for:
- Working capital
- Inventory
Advantages:
- Longer loan terms
- Lower down payments
- Easier to qualify
Loan maturity:
- Up to 10 years for equipment
- Up to 25 years for owner-occupied real estate purchase, refinance and construction.
SBA Economic Injury Disaster Loans (EIDLs)
EIDLs can be used to help a business recover from a federally declared disaster or emergency. They can be used for losses not covered by insurance or funding from the Federal Emergency Management Agency. The funds can also be applied to business operating expenses that could have been met in the absence of the disaster. These loans are typically — but not always — issued directly from the SBA.
- Loan size: The maximum loan amount is $2 million.
- Type: Term loan
- Term: Up to 30 years
How to apply for an SBA loan?
Every SBA loan program is unique, and loans often revolve around how the money will be used and the terms under which it should be repaid.
To apply for an SBA loan, follow these steps:
Step 1: Know exactly what your business needs are
Be able to answer the following questions:
- Why do you need the money?
- How much do you need?
- How long will it take you to pay it back?
- What is the current financial health of your business?
- Do you have collateral to put up?
- How fast do you need the money?
The answers you give will help determine your best course of action. Once you know how much you need and how it will be used, the better equipped you’ll be to determine the best loan option for your business.
Purpose of the borrowed funds
Back up your request with facts that support how much you are asking to borrow. Lenders appreciate the effort, and it will give them the confidence they need to trust in your ability to pay them back.
Step 2: Identify a lender who can issue an SBA loan
Types of lenders that handle SBA loans
- SBA standard lender: This qualified lender must submit transactions for review and receive an SBA authorization upon approval for every loan.
- SBA Preferred Lender: This lender is the more qualified of the two types. Loan approval times can be reduced because the SBA checks only the lender’s determination of eligibility for the borrower, not their underwriting. Fasten Loan Financing LLCs‘ is an SBA Preferred Lender.
Step 3: Know what lenders are looking for
The six Cs of creditworthiness:
- Capacity: Can your business absorb unexpected expenses or a downturn in the economy?
- Capital: Do your assets outweigh your liabilities? How much capital have you and others invested?
- Collateral: This includes accounts receivable, inventory, cash, equipment and commercial real estate.
- Conditions: Certain factors, such as the economy, industry trends and pending legislation, may affect your ability to make payments.
- Character: Personal integrity, industry experience, credit history and good standing are critically important.
- Communication: Your willingness to communicate candidly with your banker and your other advisors about the opportunities and challenges your business faces is key to a productive financial partnership.
Step 4: Select the type of loan that best meets your needs
Below are common types of SBA loans. Availability, term and structure vary by lender.
- SBA 7(a) loan
- SBA Express loan
- SBA 504 loan
- SBA Economic Injury Disaster Loan
Use the information above to become familiar with your options.
Step 5: Provide an overall financial snapshot of your business and have necessary documents ready
Be prepared to share details about the financial side of your business. Provide the lender with a comprehensive background on your company, future growth plans and your own personal information. The actions below will help boost your business’s financial standing.
- Maintain a good credit score
- Borrow only what you know you can pay back
- Present a repayment plan, complete with projections and a safety net
- Show a history of paying bills on time
- Provide collateral
For 7(a) and Express loans, look at the checklist the SBA has prepared before you apply to your lender. For a disaster assistance loan, you can start your application with the SBA online. If you’re applying for a 504 loan, we recommend setting up an appointment with a banker.
Step 6: Apply for your loan
Set aside some time to complete the paperwork and reach out to your banker with any questions. Make sure to respond promptly to requests for additional information so loan processing is not delayed.
How long does it take to get approved for an SBA loan?
SBA loans require approximately the same duration for approval as a traditional loan intended for a comparable purpose. A non-real estate loan may be authorized and financed in about 2 to 60 days, while a real estate loan usually requires around 5 to 90 days for approval and financing.
As a borrower, you can expedite the process by staying involved with your lender and supplying the required documents promptly. The more involved you are as a borrower, the quicker the lender can proceed
Small Business Administration (SBA) loans provide up to 90% financing. Requires approval through the SBA 7(a), SBA 504 or SBA Express programs. Subject to credit approval. Fasten Loan Financing LLCs credit standards, loan terms, collateral and documentation requirements apply and are subject to SBA guidelines.
Owner-occupied commercial real estate will be determined in underwriting and requires occupancy by the borrower/guarantor. Please note SBA guidelines require at least 51% occupancy to be considered owner-occupied.
The minimum loan amount for ground-up construction is $500,000.
Speak to your SBA specialist to learn more about down payment options. The maximum loan amount for SBA Express loans is $500,000.
Loan amount assumes a 10% client injection and 40% Certified Development Company participation.