A Small Business Administration loan is a bank loan with a federal backstop. The SBA guarantees a portion of the loan — typically 75% to 85% — which makes the lender willing to offer longer terms and lower down payments than a conventional business loan, to borrowers who could not otherwise get credit on reasonable terms. The borrower still repays the lender, still personally guarantees the loan, and still pays interest and fees; the guaranty is the lender’s protection, not the borrower’s. This guide explains the three main programs — 7(a), 504, and microloans — what each costs under the current fee schedule, who qualifies, and how to navigate the process without wasting months.

The main programs: 7(a), 504, and microloans

The 7(a) program is the workhorse. Loans run to $5 million and can be used for almost any legitimate business purpose: working capital, equipment, inventory, refinancing business debt, buying a business, and buying or improving owner-occupied commercial real estate. Terms run up to 10 years for working capital and equipment and up to 25 years for real estate. Interest rates are capped by SBA rules at a base rate (usually prime) plus a margin of 3 to 6.5 percentage points depending on loan size, and most 7(a) loans carry variable rates. SBA Express, a faster sub-program, caps loans at $500,000 with a 50% guaranty and a lender-driven decision, in exchange for speed.

The 504 program is narrower and cheaper for its purpose: buying major fixed assets — land, buildings, and long-life equipment. A 504 project is typically financed in three pieces: the bank provides about 50% as a first mortgage, a Certified Development Company provides about 40% through an SBA-guaranteed debenture (up to $5 million, or $5.5 million for manufacturing and certain energy projects), and the borrower injects about 10% equity (15% to 20% for start-ups or single-purpose assets). The CDC portion carries a fixed rate for 10, 20, or 25 years, which is the program’s main attraction for owners who want predictable payments on property they plan to keep. Since July 2026, the 7(a) and 504 programs have separate $5 million caps, so a borrower can use both up to $10 million combined.

Microloans serve the smallest end: up to $50,000 (averaging about $13,000) through nonprofit intermediary lenders, with terms up to seven years, for working capital, inventory, supplies, and equipment — but not for buying real estate or refinancing existing debt. They are the right tool for a new or very small business that needs a modest amount and hands-on help; they are not a substitute for a 7(a) loan at scale.

What an SBA loan costs: interest and the guaranty fee

Beyond interest, the main extra cost on a 7(a) loan is the upfront guaranty fee, charged on the guaranteed portion and usually financed into the loan. For loans approved from October 1, 2026 through September 30, 2027 with terms over 12 months, the fee is 2% of the guaranteed portion on loans of $150,000 or less, 3% on loans of $150,001 to $700,000, and 3.5% on the first $1 million of the guaranteed portion plus 3.75% above $1 million on larger loans. Loans of 12 months or less pay 0.25%. Lenders also pay an annual fee of 0.55% of the outstanding guaranteed balance, which they may not pass on to the borrower, and they may charge their own packaging and closing costs.

A worked example shows why the fee schedule matters to the payment. Take a $400,000 7(a) loan: the guaranty is 75%, or $300,000, and the fee at 3% is $9,000. Financed into the loan, the amount borrowed becomes $409,000, and every payment is computed on that figure. On a $1,500,000 loan, the guaranteed portion is $1,125,000, and the fee is 3.5% of the first $1,000,000 ($35,000) plus 3.75% of the remaining $125,000 ($4,687.50), or $39,687.50 in total. These are fees for the fiscal year stated; the SBA reviews the schedule annually, so confirm the current figures with your lender before applying.

Fee waivers apply for fiscal 2027 to qualifying manufacturers, food-supply-chain businesses, and rural businesses on 7(a) loans of $700,000 or less (no upfront guaranty fee), and 504 fees are waived for the same groups. Veteran-owned businesses pay no fee on SBA Express loans. If you fall into one of these categories, say so early — the waiver is applied at approval, not refunded later.

Who qualifies, and what lenders actually weigh

Eligibility has two gates. The SBA gate: a for-profit business operating in the United States, meeting the SBA size standard for its industry, with owners who have invested equity and who personally guarantee the loan, and a demonstrated inability to obtain credit elsewhere on reasonable terms. The lender gate: cash flow sufficient to service the debt, usually measured as a debt-service coverage ratio — the business’s available cash flow divided by its debt payments — with many lenders looking for about 1.15 to 1.25 times coverage or better, plus acceptable owner credit, collateral where available, and a coherent use of funds.

Collateral deserves a clear statement: the SBA requires lenders to take all available collateral, but a shortfall in collateral alone is not grounds for decline if cash flow is strong. Conversely, strong collateral does not rescue weak cash flow. Start-ups face the hardest test, because they have no history: lenders weigh the owner’s experience in the industry, the equity injection (often 10% to 30% of project cost for start-ups), and the quality of the business plan’s projections. A projection that shows the business covering its payments only in the best case will not survive underwriting; show the base case, and show what happens if revenue comes in 20% light.

Personal guarantees are mandatory for every owner of 20% or more, and they are real: the guaranty survives the business, and the SBA and lender can pursue personal assets on default, subject to the terms of the guaranty and applicable law. Understand this before signing, not after. It is the single most consequential feature of SBA borrowing, and the reason the payment estimate on the calculator page should be treated as a commitment test, not a formality.

Choosing between 7(a) and 504

Choose 504 when the purpose is a major fixed asset you will occupy and hold for a long time, and predictable fixed payments matter more than flexibility: the CDC portion’s fixed rate for up to 25 years is unmatched by any 7(a) structure. Choose 7(a) when the purpose is mixed — working capital plus equipment, say — when you need more than the 504 structure allows, when the asset is not owner-occupied real estate, or when you value the ability to prepay without the 504 debenture’s prepayment penalty, which applies in the early years of the CDC portion.

A simple decision table helps. If the loan is under $500,000 and speed matters, look at Express first. If the purpose is buying the building you operate from and you can put 10% down, price a 504 alongside a 7(a) real-estate loan and compare the total cost over the expected holding period, not just the first year’s payment. If the purpose is buying a business, 7(a) is the usual vehicle, and the lender will scrutinise the seller’s earnings and the buyer’s industry experience closely — under current rules, acquisition loans face a 1.25-times debt-service coverage test measured on actual earnings. Whichever program fits, apply through a lender with a real SBA track record; the program choice matters less than the lender’s competence.

Applying: the file, the timeline, and the common delays

Assemble the file before you apply: business plan (start-ups), three years of business tax returns and financial statements, three years of personal tax returns and a personal financial statement for each 20% owner, a schedule of existing business debts, and a clear statement of how the loan proceeds will be used. Lenders also commonly ask for a resume for each owner, leases, and, for real-estate loans, appraisals and environmental reports. Missing documents are the most common cause of delay, and a file that arrives complete signals a borrower who will manage the loan well.

Expect 60 to 90 days from a complete application to funding for a standard 7(a) or 504 loan, and a few weeks for Express. Preferred Lenders — lenders the SBA has authorised to approve guaranties themselves — remove one review step and are worth seeking out; the SBA’s lender search tool lists them. If you are declined, ask for the reasons in writing: a decline for insufficient cash flow is a different problem from a decline for collateral or credit, and each has a different fix. Many borrowers succeed on a second application, to a different lender, after addressing the stated reason — but only if they know what it was.

Frequently asked questions

What is the maximum SBA 7(a) loan?

$5 million. The SBA guarantees up to 85% of loans of $150,000 or less and 75% of larger loans. The 504 program has a separate debenture cap of $5 million ($5.5 million for manufacturing and certain energy projects), and since July 2026 the two caps are separate, allowing up to $10 million combined.

Does the SBA lend money directly to small businesses?

Generally no. The SBA guarantees loans made by approved lenders. Disaster loans are the main exception, made directly by the SBA. You apply for 7(a), 504, and microloans through a lender or intermediary, not through the SBA itself.

What is the SBA guaranty fee?

An upfront fee on the guaranteed portion of a 7(a) loan. For loans approved October 1, 2026 to September 30, 2027, it is 2% (loans up to $150,000), 3% ($150,001–$700,000), or 3.5% on the first $1 million guaranteed plus 3.75% above that, with waivers for qualifying manufacturers, food-supply-chain, and rural borrowers on loans of $700,000 or less.

How long does it take to get an SBA loan?

Express loans can close in weeks. Standard 7(a) and 504 loans commonly take 60 to 90 days from a complete application to funding. Incomplete files, real-estate appraisals, and environmental reviews are the usual causes of longer timelines.

Do I need collateral for an SBA loan?

Lenders must take all available collateral, but a collateral shortfall alone does not disqualify a loan if cash flow is strong. Expect to pledge business assets and, for real-estate loans, the property itself. Every owner of 20% or more must also personally guarantee the loan.

Can a start-up get an SBA loan?

Yes, through 7(a) or microloans, but the test is stricter: lenders weigh the owner’s industry experience, the equity injection (often 10% to 30% of project cost), and the credibility of projections. A complete file and a realistic base case matter more for start-ups than for established businesses.