July 20, 2021 By SmartBiz Team

The coronavirus pandemic highlighted the importance of small business funding. During the economic crisis, the Small Business Administration (SBA), offered Paycheck Protection Program (PPP) forgivable loans to qualified business owners. The SmartBiz Loans team and banks in our network are proud that we helped businesses get these loans to keep employees on the payroll and continue operations during a difficult time.

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The PPP program has expired, but there is still a deep need for business funding to help repair the economy. The SBA has other low-cost loan programs that can help small business owners across America expand and save money. After all, small businesses are vitally important to the U.S. economy, employing almost half of the nation's private sector workforce --that's 120 million people. For more information about the SBA, check out our infographic: Get to Know the SBA.

Here is information on three popular loan programs offered by the SBA. They have different requirements, rates and terms and use of proceeds so choose the one that’s the best fit for your unique business.

What are government loans?

Government loans are loans insured or backed by the federal government. These types of loans protect the lender if you don't pay back the money you borrow. There are many types of government loans, including loans for veterans, college education, mortgages, disaster relief and for opening a business. The loans outlined below were created to help small businesses in America thrive.

Benefits of a small business government loan

Do you need inventory, equipment, or employees? Would refinancing high interest debt decrease your monthly payments and free up cash flow? Your best bet to fund these business building initiatives is with a low-cost loan.

The 7(a) Loan Program

This is the SBA’s most popular loan program because of low rates, long terms, and very low monthly payments. Established small business owners with healthy credit scores are the best candidates for an SBA 7(a) loan.

Most 7(a) term loans are repaid with monthly payments of principal and interest. There are also various fees associated with this type of government program. Insist on transparency so you won’t be surprised by added costs.

Even after fees, SBA7(a) loans are vastly cheaper than most of the alternative financing and alternative lender options.

SBA 7(a) lenders may have slightly different requirements to qualify. In general, the following apply:


  • 2+ years in business
  • Owners must be U.S. citizens or legal permanent residents
  • Personal credit scores above 650
  • Cash flow to support loan payments


  • Bankruptcies or foreclosures in the last 3 years
  • Prior default on government backed loans
  • Outstanding tax liens
  • Loan proceeds cannot be used for unpaid taxes

Loan proceeds for an SBA 7(a) loan can be used in a variety of ways. Low-cost funds can be used for working capital, to refinance existing high-cost debt, for equipment purchases, hiring, marketing, commercial real estate purchases or refinance and more.

Considering an SBA 7(a) loan? Learn more about this low-cost funding option: SBA loans—the gold standard in small business lending.

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. Created to give small businesses low-cost funds for expansion or modernization, 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 small business owner.

SmartBiz Loans does not offer SBA 504 loans.

Here are the minimum 504 Loan Requirements:

  • For profit business
  • Must present a comprehensive business plan and show relevant management expertise
  • Operate your business in the United States or its territories.
  • Business net worth must be less than 15 million dollars
  • Business must have an average net income less than $5 million
  • Ability to repay the loan on time based on cash flow
  • The use of proceeds from 504 Loans must be used for fixed assets (and certain soft costs), including the purchase of buildings, land and land improvements, construction of new facilities or modernizing, renovating, or converting existing facilities, the purchase of long-term machinery or debt refinance in connection with an expansion of the business.

For more information about the CDC/504 Loan Program, visit the SBA website here. For additional information on eligibility criteria and loan application requirements, contact your local Certified Development Company (CDC).

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The Microloan Program

The SBA Microloan Program is different than other Small Business Administration loans. The SBA loans money to intermediary nonprofit lenders who then fund business loans to startups and small businesses, up to $50,000. In 2017, the average microloan was approximately $14,000.

Many of these loans are granted to businesses run by women, minorities, or veterans. If you need less than $50,000 with good credit and have a business plan, a microloan might be a fit to fund your business. If you need more than $50,000 or have poor credit, a microloan is not for you.

Proceeds from the Microloan can be used for working capital or buying inventory, equipment and more. Proceeds cannot be used to refinance debt or purchase real estate.

To be eligible for the SBA Microloan problem, here’s what you need:

  • Have a for-profit small business. Exception: non-profit childcare centers are eligible.
  • The average minimum credit score of borrowers is 575. Microlenders will work with business owners who have a short credit history or less-than-stellar scores. Bankruptcies or foreclosures can make qualifying more difficult. To make up for a bad credit score you can present good revenue, valuable collateral, or a co-signer.
  • Ability to repay the loan.

Additional Details

The max amount of a microloan is $50,000. Some intermediaries offer loans as small as $500.

Repayments terms cannot exceed 6 years and you can work on a repayment schedule with the intermediary lender.

Non-government loans for small businesses

A business term loan is a lump sum of capital that you pay back with regular repayments at a fixed interest rate—this type of traditional financing is what most people think of when it comes to small business loans.

What is a short-term business loan?

Short-term business loans are a type of term loan. A one-time, lump sum is paid out to the borrower up front. The borrower must repay the full sum plus interest and any fees over the term-typically ranging from a few months to a few years. Banks in the SmartBiz network offer Bank Term loans with 2–5-year repayment terms. To learn more, visit the SmartBiz website here.

What is a long-term business loan?

Long-term loans are a type of term loan that typically have a life of at least 10 years, paid down in monthly installments. When the repayment terms are long, the associated monthly payments are smaller since the total owed is broken down into more segments. These are most useful when you’re planning for steady growth over time, instead of addressing immediate needs.

How term loans work

When your business qualifies for a term loan, you’ll receive an agreed-upon sum of money to be paid off, plus interest, with scheduled monthly payments over a set repayment term. Loan amounts can range anywhere from $25,000 to $500,000.

Term loans generally come with interest rates on the lower side.

*Interest rate on bank term loans depend on loan term and the applicant's credit and financial profile.

In conclusion

America is back in business and low-cost funding will help speed economic recovery. The SmartBiz Loans team is here to help entrepreneurs get back on their feet. From funding solutions to small business resources, keep an eye on the SmartBiz Small Business Blog for up-to-date information to help your business operations improve and grow.

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