SBA loans are a type of business loan that are partially guaranteed by the U.S. Small Business Administration. These loans are issued by participating lenders, such as banks, and have strict lending standards. However, if you are eligible and can qualify for an SBA loan, you may benefit from their flexible terms and low-interest rates, making them one of the most desirable small business loans available.

SBA loans are designed to cover various business expenses, such as startup costs, working capital needs, expansions, real estate purchases, and more. This type of financing is issued by a private lender, but it’s backed by the federal government, specifically the Small Business Administration. In the 2024 fiscal year, more than $11 billion in SBA 7(a) lending has already been approved.

To apply for an SBA loan, you need to go through a lending institution such as a bank or credit union. The lender then applies to the SBA for a loan guarantee, which means if you default on an SBA loan, the government pays the lender the guaranteed amount. However, the SBA requires an unconditional personal guarantee from everyone with at least 20% ownership in a company. This guarantee puts you and your personal assets on the hook for payments if your business can’t make them. 

There are different types of SBA loans available, each with its own terms and conditions. The best SBA loan for you will depend on your business’s needs. SBA 7(a) loans offer up to $5 million for working capital, expansion, and equipment purchases. SBA Express loans offer up to $500,000 for fast funding for working capital, expansion, and real estate and equipment purchases. [Plate Number 1] loans offer up to $5 million (up to $5.5 million for select projects) for purchasing long-term, fixed assets like land, machinery, and facilities. Additionally, the SBA offers lines of credit, real estate loans, and business acquisition loans.

SBA loans tend to offer competitive rates, with participating lenders basing SBA loan interest rates on the prime rate plus a markup rate known as the spread. APRs can vary substantially between SBA lenders and non-SBA lenders. SBA loans also have low fees, with no upfront guarantee fees or annual service fees for SBA 7(a) loans of $1 million or less through September 2024. Additionally, SBA loans tend to have longer terms, allowing for more time to repay them. Lastly, SBA loans offer large loan maximums, with 7(a) loans offering a maximum loan amount of $5 million and the 504/CDC program offering a maximum loan amount of $5 million (up to $5.5 million for small manufacturers and eligible energy public policy projects). These are much larger loan amounts than are typically offered by online lenders or even banks.

In summary, SBA loans are a reliable and flexible way to fund your small business operations, designed to help you achieve your business goals. With the backing of the U.S. Small Business Administration and participating lenders, you can be confident in the financing you receive, knowing that it offers competitive rates and terms, low fees, longer repayment periods, and large loan maximums.

At Resonate Business Services, we have lenders who offer SBA Loans.