July 12, 2021 By SmartBiz Team

Paycheck Protection Program (PPP) funding has been depleted but many, many small business owners are still in need of low-cost capital to rebuild, rehire, and move forward.

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The Small Business Administration (SBA) is a government agency with the aim to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” The SBA’s small business loan programs are a lifeline for both new and established entrepreneurs. Here’s information you need to know to help you decide the best way to fund your business post-pandemic.

History of the Small Business Administration

Congress created the Small Business Administration in 1953. By 1954, SBA already was making direct business loans and guaranteeing bank loans to small businesses.

The SBA was also working to get government procurement contracts for small businesses and helping business owners with training, management assistance and technical help.

In 2020, small business owners faced the biggest economic challenge in modern times. The coronavirus shut down businesses across the U.S., forcing many to shutter. The SBA stepped up, offering forgivable PPP funding to help keep small business employees on payroll and business operations afloat. Although that program has ended, SBA programs continue to support small businesses in all areas. Those include specialized programs for women, minorities and veterans. SBA also provides loans to victims of natural disasters like flooding and wildfires along with specialized help in international trade.

The most popular SBA program continues to be their flexible funding options. Here are loans for small business owners available today.

What is an SBA Loan?

The most prominent assistance program that the SBA offers is a guarantee on loans made through banks, credit unions, and other lenders they partner with. By securing a portion of the loan in the case of the borrower defaulting, the lenders are presented with less risk so they are more likely to offer an affordable loan. Since 2009, the SBA has backed over $150 billion through its various programs.

The PPP was a lifeline for business owners. Estimates are that this program saved 1.4 million to 3.2 million jobs. But business owners can continue to move forward with low-cost funding with low monthly payments.

How can you benefit from an SBA loan?

The SBA guarantee enables banks to extend more favorable loan terms and to lend to businesses that sometimes wouldn’t be able to borrow money conventionally.

Wide use of funds - Businesses can use these low-cost funds for many different purposes, including:

  • Purchasing fixed assets such as equipment, machinery and commercial real estate
  • Refinancing existing debt
  • Buying another business
  • Bolstering working capital
  • SBA loans usually have lower down payment requirements than traditional bank loans.
  • Many SBA loans require an equity contribution as low as 10%, enabling businesses to keep more cash in their coffers instead of tying it up in fixed assets.
  • SBA loans usually feature longer repayment terms than traditional bank loans.
  • There is no prepayment penalty, so SBA loans can be repaid sooner if cash flow allows.
  • Both new and established businesses can apply for SBA loans.

What are the different programs?

The SBA 7(a) loan program

The most popular program, often known as the “gold standard” for lending, is the 7(a) loan program. Here are details to know:

Use of Proceeds for SBA 7(a) loans

If you’ve secured a Paycheck Protection Program (PPP) loan, you probably know that there are strict use guidelines to qualify for forgiveness. SBA loans are extremely flexible and can be used for a multitude of purposes.

  • Working Capital – Purchase equipment, increase inventory, add marketing programs, use for operating expenses or to hire additional staff.
  • Debt Consolidation Loans – Refinance merchant cash advances, short-term business loans, high interest business loans, daily or weekly payment loans or business credit cards.
  • Commercial Real Estate – Refinance an existing commercial real estate mortgage, buy an office building or other owner-occupied commercial space.

Advantages & disadvantages of SBA 7(a) loans

Before deciding to apply for an SBA loan, review these advantages and disadvantages.


  • Highly competitive, low interest rates
  • Long loan terms, up to 25 years
  • Fixed and variable-rate options are available
  • A variety of businesses are eligible
  • Wide use of proceeds allowed
  • Most SBA loans, including 7(a) loans are fully amortizing, meaning borrowers don’t have to worry about balloon payments


  • Approval times can be lengthy
  • Lots of documentation required
  • Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
  • High credit scores are typically required


The interest rate is not the only charge associated with 7(a) loans, which is why it’s helpful to check the APR (Annual Percentage Rate) as well. You’ll probably be responsible for a guaranty fee paid to the SBA. In addition, you might encounter origination fees, packaging fees, and other closing costs. Even with these fees and other costs, SBA 7(a) loans are still a better deal than most small business loans.

SBA 7(a) turnaround time

From qualifying to moving through the application to being approved for funding, the turnaround time for an SBA 7(a) loan will mostly depend on how prepared you are to provide financial documents and answer any questions that may arise.

Even still, some elements of the process can take longer than others. For example, you might have to spend some time working with an accountant to gather specific paperwork or adjusting to your lender’s timeline.

SBA 7(a) amounts available

Banks in the SmartBiz Loans network offer SBA 7(a) loans from $30,000 – $350,000 for debt refinancing and working capital. Working capital includes operational expenses, marketing, hiring, etc. SBA loans can be used to fund new equipment purchases as well.

SBA Commercial Real Estate loans are available from $500,000 – $5 million from banks in the SmartBiz network. Funds can be used for the purchase or refinance of commercial real estate that is 51% owner-occupied.

SBA 7(a) maturity

Business owners don’t need to worry about large monthly loan payments that can cut into valuable cash flow. That’s why an SBA 7(a) loan with long terms is often the best choice. Payments are very low and more manageable.

SBA 7(a) loans used for working capital or debt refinance have a payment length of up to 10 years. For example, a $100,000 loan with an 10% annual percentage rate would require monthly payments of $1,424 over 10 years. The same loan with a five-year term would require monthly payments of $2,260.

For loans used to buy commercial real estate, the maturity is up to 25 years.


For a $30,000 to $350,000 SBA 7(a) working capital or debt refinance loan:

  • Time in business must be above 2 years
  • Business owner’s personal credit score must be above 650
  • Business must be U.S. based and owned by US citizen or lawful permanent resident who is at least 21-years old
  • No outstanding tax liens
  • No bankruptcies or foreclosures in the past 3 years
  • No recent charge-offs or settlements
  • Current on government-related loans

For a $500,000 to $5 million SBA 7(a) Commercial Real Estate loan:

  • Time in business must be above 2 years
  • The business owner’s personal credit score must be above 675
  • The real estate must be majority owner-occupied, i.e. at least 51% of the square footage of the property you’re buying must be occupied by and used by your business
  • Sufficient business and personal cash flow to service all debt payments, demonstrated by 3 years of tax returns and interim financial data
  • No delinquencies and/or defaults on government loans

How to apply

Applying for an SBA 7(a) loan takes some work on a business owner’s part to submit accurate financial documents and other paperwork. Because of the coronavirus pandemic’s effect on small businesses, SBA 7(a) lenders now have additional questions regarding how your business is operating.

Your best bet is to be as organized and prepared as possible and have realistic expectations about effort and timing. A good strategy is to work with your bookkeeper, accountant, or another small business financial professional to gather paperwork. Here are steps to help the process move smoothly.

1. Determine Eligibility

Before beginning your application, make sure that you meet basic eligibility requirements. You don’t want to invest your valuable time if you don’t qualify. Eligibility requirements, in addition to SBA requirements, can vary from lender to lender.

2. Prepare a Business Plan (SmartBiz Loans does not require a business plan)

If you’re ready for an SBA loan and meet the basic qualifications, the next step is to solidify a business plan to demonstrate that your small business is financially healthy and eligible for low-cost, secure funding. FYI: SmartBiz Loans does not require a business plan to qualify.

Submitting a business plan is a unique opportunity for you to present a roadmap with concrete details on how you plan to achieve your goals. A business plan will help you set milestones to measure success and position yourself within your industry. You’ll give lenders an accurate picture of where you’re headed in the future.

3. Gather the paperwork

No matter which lender you’re working with, having all the necessary documentation is crucial to obtaining your funds as quickly and efficiently as possible. As you’re progressing through the application, you’ll need to demonstrate that you’re able to make regular payments. Some of the most common documents that our partners request include:

  • Personal & Business Tax Returns
  • Personal Financial Statements, required from each individual owning 20% or more of the company
  • Profit and Loss Statement
  • Balance Sheet
  • Collateral

4. Prepare for questions about your operations during the coronavirus shut-down

Since the pandemic, lenders will also want to know:

  • The industry you operate in and how it was impacted overall
  • How the coronavirus has impacted your business
  • Changes you’ve put in place to mitigate the financial impact
  • How you will use the funds to rebuild

5. Connect with an SBA Loan Lender

Avoid going from bank-to-bank to find a lender who will approve your application. When you work with SmartBiz Loans, we’ll help you increase your chances of getting a “Yes” by matching you with the bank partner most likely to fund your particular business profile. See if you prequalify by answering a few questions about your business and you’ll be on your way to applying for quick, easy, and transparent funding.

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The CDC/504 Loan Program

This program is described by the SBA as a win-win-win for the small business, the community, and participating lenders. The CDC/504 Certified Development Company Loan program conserves your working capital by requiring only a 10 percent borrower contribution. If you do not qualify for conventional financing, the SBA-backed 504 loan may be right for you.

Certified Development Companies (CDCs) are nonprofit corporations that promote economic development within their communities.

The SBA authorizes CDCs to provide financing to small businesses with the help of third-party lenders (typically banks) 504 loans.

Maximum SBA loan amount

The maximum SBA loan amount for 504 SBA loans is capped at $5 million. Certain eligible energy-efficient or manufacturing projects may qualify for more than one 504 loan up to $5.5 million each.

Required equity

A low down payment (10 percent in most cases) conserves your working capital.


10, 20 or 25 year terms. The longer the terms, the lower monthly payments will be.

Use of proceeds

Long-term, fixed assets for expansion or modernization (usually real estate or large equipment). Refinancing of large equipment and/or owner-occupied commercial
real estate may also be possible.

The CDC/504 Loan Program: How It Works

The 504 Loan Program was created to give small businesses low cost funds for expansion or modernization.

Typically, up to 50% of project costs are funded by a lender backed by the SBA. CDCs (Community Development Corporations) typically fund up to 40% of the project cost. The final 10% is a cash down payment expected to come from the borrower.

SmartBiz Loans does not offer SBA 504 loans but banks in the SmartBiz network fund SBA 7(a) loans, Bank Term Loans, and more financing options.

Who are 504 Loans For?

A 504 SBA loan might be a good fit for small business owners interested in purchasing a commercial real estate property and if their unique business circumstances fit with the public policy goals of your local CDC.

Minimum 504 Loan Requirements

Your business must be for profit, you’ll need to present a comprehensive business plan and relevant management expertise is required. Additionally, you must meet the following conditions:

  • Operate your business in the United States or its territories.
  • The business net worth must be less than 15 million dollars
  • Your business must have an average net income less than $5 million
  • You must have the ability to repay the loan on time based on cash flow

The Microloan Program

The Microloan Program is for very small businesses, including start-ups and provides loans of up to $50,000. (Although SmartBiz Loans does not offer microloans, we do offer SBA 7(a) loans from $30,000.)

Microloan Amounts

Borrowers can apply for up to $50,000 with the average loan size funded by the SBA just $14,215 in 2016.

Microloan Interest Rates

Microloans have interest rates between 8%-13% and must be fixed rate and fixed term with regularly scheduled payments.


Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner.


Loan repayment terms vary according to several factors:

  • Loan amount
  • Planned use of funds
  • Requirements determined by the intermediary lender
  • Needs of the small business borrower
  • The maximum repayment term allowed for an SBA microloan is six years.

Use of Proceeds

Proceeds from an SBA Microloan can be used for most business expenses such as:

  • Working capital
  • Inventory or supplies
  • Furniture or fixtures
  • Machinery or equipment

You cannot use a SBA microloan to refinance existing debt or to purchase real estate. If you need to refinance debt or purchase real estate, you should consider other SBA loan programs, such as a 7(a) commercial real estate loan.

How It Works

An SBA Microloan is a loan of up to $50,000 from an intermediary nonprofit to the owner of a small business or startup. The money originates from the SBA, which initially lends the money at a discounted rate to the intermediary. In other words, there’s a multi-step process.

Who Are Microloans For?

These small loans help small business owners who need less than $50,000 to strengthen and grow their business.

Microloan requirements

Check with your individual lender as requirements can vary. In general:

  • Credit score of at least 640 is required.
  • The business owner will need to either put up collateral or sign a personal guarantee.

SBA 7(a) loans

An SBA 7(a) loan is generally known as the “gold standard” in small business funding because of low rates, long terms, and very low monthly payments.

Minimum amount

Banks in the SmartBiz network fund SBA 7(a) loans from $30,000 - $5 million


A lien on business assets is required for SBA loans, but there is no minimum requirement for the value of those assets.


The term for an SBA 7(a) working capital loan is 10 years with low monthly payments. The term for an SBA 7(a) commercial real estate loan for purchase or refinance is 25 years with no balloon payment.

Use of proceeds

A big draw of SBA 7(a) loans is the wide use of proceeds. These include:

SBA 7(a) loans from $30,000 – $350,000 from banks in the SmartBiz network can be used for debt refinancing and working capital. Working capital includes operational expenses, marketing, hiring, etc. SBA loans can be used to fund new equipment purchases as well.

SBA 7(a) loans can also be used for refinancing existing business debt not secured by real estate (such as cash advances, business loans, and equipment leases).

SBA Commercial Real Estate loans from $500,000 – $5 million from banks in the SmartBiz network can be used for the purchase or refinance of commercial real estate that is 51% owner-occupied.

Debt refinancing

Working capital (includes operational expenses, marketing, hiring, etc. SBA loans can be used to fund new equipment purchases as well)

Bottom line

The SmartBiz Loans Small Business Blog was created for established small business owners. In addition to robust content about business operations, lending is a primary topic. Additionally, we offer more SBA articles so you can utilize the agency to rebuild and grow.

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