SBA Lending 101

What Is The SBA Loan Guarantee Program?

The Small Business Administration (SBA) loan guarantee program is a federal government program aimed at helping small business by offering local banks federally-backed loans to qualified borrowers.

What Can the SBA Loan Program Do for A Borrower?

  • Offer extended loan terms/amortization which will improve cash flow
  • Reduce down payments
  • Cover collateral shortfalls
  • Provide extension of credit when not available elsewhere
  • Mitigate change of ownership risk by leveraging the SBA guarantee
  • Eliminate financial covenants (but not reporting requirements)
  • Consider the entire project for financing – including all soft costs

3 Main Lending Program Types

(1) 7(a) Program

  • 75% guarantee
  • Loans of $350,000-$5,000,000
  • Used for start-ups, business acquisitions, goodwill, debt refinance, commercial real estate, equipment, leaseholds, and expansions
  • Loan fees: As of mid-2023, the fees are:
  • For loans up to $1 million: 1.45%
  • For loans of $1-2 million: 1.45% of the guaranteed portion of the loan up to and including $1 million, plus 1.7% of the guaranteed portion over $1 million
  • For loans over $2 million: 3.5% of the guaranteed portion of the loan up to and including $1 million, plus 3.75% of the guaranteed portion of the loan over $1 million.

(2) 504 Program

  • Used for real estate or large equipment purchases (hard assets)
  • Typical structure: 50/40/10 or 35/50/15 for new entities/startups
  • Fixed rates available on both bank term debt and debenture (i.e. bond)

(3) Express Program

  • Used as revolving line of credit for business working capital purposes
  • 50% guaranty
  • Loans up to $500,000

Not all loans require SBA backing, and not all banks offer SBA backed loans. If you’re interested in a SBA backed loan, contact your local bank for more information. Note: the SBA often requires additional information from the borrower (such as a business plan) as part of the approval process, and SBA approvals often take longer than conventional loans without SBA guarantees.

Visit the SBA at

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