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Check your SBA Loan IQ

How much do you know about SBA loan programs?  Understanding how SBA loans match up against conventional loans may expose some additional, attractive options to support your business. 

Many business owners assume Small Business Administration (SBA) loans are administered by the federal government, whereas they are actually administered and processed by local and regional commercial banks. With SBA loans, the federal government invests in the small business base as an engine for overall economic recovery and growth by guaranteeing SBA loans. That guarantee enables lenders to take additional risks that allow them to lend to business owners who might not otherwise qualify for conventional loans.  The result is that business owners accept attractive financing to grow their businesses and fulfill the federal government’s policy goal of generating overall economic and employment growth.

The SBA understands that small business owners do not have the breadth of resources and business diversification to absorb risk as larger businesses can. SBA loans are designed to share or support that risk, giving business owners access to market opportunities for improvement, growth, and restructuring that they might not have received with conventional loan products. The design of SBA loan programs is unique, supporting greater flexibility in lending to a broader audience of companies with attractive terms.

The chart below shows a comparison of SBA loans to conventional loans:


SBA Loan

Conventional Loan




Interest rate

Competitive Fixed and Variable Rates Available

Competitive Fixed and Variable Rates Available

Business history

No stated minimum

Varies, 3-5 years

Down payment

As low as 10 percent

Typically 20 percent or higher

Loan amortization

Up to 25 years for real estate

Up to 10 years for equipment

Up to 7 years for working capital

0-15 years

Use of proceeds

Very flexible and loan may cover multiple purposes, such as:

-          Real Estate

-          Working Capital Equipment


Each loan is usually made for a single use

Treatment of goodwill (for business acquisition or restructuring ownership)


Generally not financeable

SBA Options:  Several Different Programs

There are a handful of SBA programs providing different loan types for different purposes.

SBA 7(a) Program. The most popular loan product is the more flexible, the SBA 7(a) Program. It can be used for a wide variety of financing needs, e.g., growth, acquisition, restructuring, etc.  Loans up to $5 million are possible with down payments as low as 10 percent.

SBA 504 Program. The 504 program is typically used for commercial real estate transactions. Both fixed and variable rates are available. Loans terms may extend up to twenty years. Capital plans that include two uses for capital (one real estate and the other equipment, acquisition, etc.) can sometimes combine the 504 with the 7(a) to access greater amounts of capital.

SBA  Express Programs. The Express programs are designed to provide both shorter-term working capital and asset needs with a streamlined process. The Export-Express program is designed for companies with existing exports or the goal to begin exporting to other countries.

SBA  Specialty Programs. SBA includes programs targeting military veterans, minority-owned businesses, disaster recovery loans and other special focus programs. The best way to learn about these programs is to talk to your banker and ask for access to an SBA Specialist to learn more about how these programs may apply to your business.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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