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According to the U.S. Small Business Administration (SBA), small businesses account for 99.9% of all businesses in the U.S. But what exactly is a small business?

The SBA sets specific criteria to categorize businesses under the ‘small business’ designation, in order to determine eligibility for support initiatives and funding, like SBA loan programs. Below, we’ll dive deeper into how the SBA defines a small business, so you can determine whether you meet  and qualify for certain benefits.

The SBA definition of a small business.

The SBA defines a small business by the maximum number of employees, or maximum amount of annual receipts it has. However, these maximum limits depend upon the industry of the company, which we'll explore below.

Criteria for qualifying as a small business.

The SBA uses two possible size criteria that a business can qualify as “small” under - the Industry Size Standard, and the Alternative Size Standard.

SBA Industry Size Standard

For each industry classified by the North American Industry Classification System (NAICS), the SBA weighs economic characteristics like:

•  Degree of competition
• Average business size
• Start-up costs and entry barriers
• Distribution of businesses across the industry by size
• Technological changes
• Competition from other industries
• Growth trends
• Historical activity
• Unique factors

Then, the SBA establishes an industry size standard to define a small business in that industry, consisting of the maximum number of employees, or maximum amount of average annual receipts a business can have to be classified as small.

To find the specific size standard for your industry, here’s what to do.

1. Look up your NAICS code.

You’ll need to have your NAICS code on hand to find your size standards. This is a six-digit code number that helps companies explain what they do. You can use the NAICS search tool to find your industry, or read our guide on how to look up your NAICS code for more information.

2. Look up your SBA industry size standard.

Once you’ve found the NAICS code that best describes the primary activity of your business, or the one that produces the most revenue, you can find the SBA size standards for that industry.

Here’s a sampling of several industries and the maximum average annual receipts or number of employees that qualify them as a small business. In reality, there are hundreds of NAICS codes, so you should look at the complete listing in the SBA table of size standards.

3. Verify you meet the SBA size standard

Confirm your employee count, or your annual receipts meets the industry size standard. You can also use the SBA size standards tool to input your information and find out if you meet the SBA’s criteria for a small business.

In addition to maximum average annual receipts and maximum number of employees, the SBA will consider whether your company meets other eligibility requirements for SBA loans.

SBA Alternative Size Standard

Small businesses can also meet the SBA size requirement through the alternative size standard.

To meet this size standard, the business can’t have a tangible net worth over $20 million dollars, and the average net income after Federal income taxes (excluding carry-over losses) for 2 full years before the application can’t exceed $6.5 million.

Benefits of being classified as a small business.

If the SBA does classify your company as a small business, this opens the door to several resources and benefits.

SBA loans

There are a number of SBA loan programs that offer low rates and longer repayment terms you might not be able to find elsewhere.

The 7(a) loan is the SBA’s most popular program and offers up to $5 million in capital for small business owners. Upon approval, you can use this capital to cover a variety of expenses, such as startup expenses, real estate, short- and long-term working capital, and equipment.

Business development programs.

The SBA has Small Business Development Centers (SBDCs) throughout the U.S. to provide small businesses with counseling, training, and technical assistance. Another organization called SCORE also offers free mentorship and resources. You can utilize these development programs if you qualify as a small business.

Government contracts. 

The SBA works partners with federal agencies to award 23% of prime government contract dollars to qualifying small businesses. If you meet the SBA definition for small business, you can submit bids and take advantage of government contracts, which offer an additional, reliable stream of income. 

Research grants

The Small Business and Innovation Research research grants are designed to encourage small business owners to dive into technology and commercialization opportunities. While this is a highly competitive program, it also offers small businesses the chance to expand your technological investment and potentially profit from commercialization.

Tax incentives

As a small business, you can also save money with tax incentives. The Small Business Health Insurance Tax Credit, for example, gives eligible small business owners the chance to save up to 50% of employee health care costs, if they buy insurance from the Small Business Health Options Program (SHOP). Some cities, like Philadelphia, also award tax credits to entrepreneurs and small business owners.

Bottom line

If you believe you’re a small business owner, there’s a good chance the SBA does, as well. But your average annual receipts and number of employees may position you as a medium sized or larger business instead. That’s why it’s wise to do some research and determine where you stand. If the SBA does consider you as a small business, you’ll have access to resources, funding options, and incentives that larger businesses won’t qualify for!

Considering small business financing? Whether you're looking for a small business loan, a business line of credit, equity financing, or another form of financing, the process is smoother when you have your ducks in a row before you start.

Why are you applying for small business financing?

Before beginning your application, work through the following questions:

• Why do you need financing?

  There are a multiple reasons to apply for small business financing, and knowing clearly your intent with the funds  can help a finance manager match you to the right product. Are you seeking financing to make repairs, to acquire much-needed equipment, to help your business bridge the gap between billing and invoice? Be sure you know how you'll use the money or credit you're requesting. While you may be able to manage with existing cash flow, a boost in funds could pay for your expansion or act as a just-in-case cushion. Remember, it's always better to apply for financing before you need it, and the terms you qualify for may also be more appealing if you apply while cashflow is strong. 

• How will the capital be used?   

  Lenders will want to know specifics. Are you investing in new equipment? Hiring more employees? Expanding or upgrading your office space? Don’t leave anything out. Specify what the funds will be used for—if you're applying for an equipment loan, state the type of equipment, the dollar amount, even the model and the brand, if you have that information. You’ll also want to articulate why you need these improvements and how will this investments will contribute to the growth of  your business. 

• When do you want/need the funds?

  Don’t wait for a crisis to apply for  small business financing of any kind. Look ahead and plan for growth and protection from potential crises.

• How much will you need?

  This is where you’ll really need to get into the details. Predict what you'll spend by doing research and getting quotes whenever possible. If you’re looking for funding to expand, it may be difficult to know if your financial forecasting is accurate. Take a big-picture view of everything you believe you'll need, then use the financial records you already have and apply this information to your future plans to give you a better idea of what you'll need to borrow.

• What's your ideal repayment schedule?

  There should be two parts to your answer: What is your preferred repayment plan? What happens if Repayment Plan A falls through? What if your sales are worse than projected—what’s your Plan B?

• How healthy is your personal/business credit?

  Your personal credit is just as important as your small businesses’s credit—especially if you’re a startup. If your business is young, lenders will want to see your personal credit as well. And, depending on the lender and the type/amount of loan or financing you're looking for, lenders will likely want to see your personal credit even if you’ve been in business for years. Lenders want to get an overall picture of your credit health. While your personal credit score may seem irrelevant, lenders view it as a great way to determine how you'll run your business

• What are the qualifications/capabilities of your management team?

  You've assembled an amazing team. Make sure you know their qualifications—this collective "resume" can be impressive to lenders.

Your 6-Item Small Business Financing Checklist

Next, it's time to gather the documents you'll need. Having these documents with you when you apply for small business financing can simplify—and speed up—the process.

1. Income Tax Returns from Previous Three Years.

Lenders will definitely want to see your tax returns—business and personal. BTW, the more profitable your small business appears on your tax returns, the easier it can be to obtain small business financing. So if you're planning in advance for a loan or other financing down the line, be sure you consider deductions carefully, particularly if they make your business seem not-so-profitable.

2. Financial Statements and Projected Financial Statements.

Balance sheet, assets, liabilities and net worth—be sure you have your financial statements available. Ensure they're accurate. Lenders will do a numbers crunch, and if you’ve manipulated anything in any way, discrepancies will raise a red flag. Tell it straight. Do your due diligence with the projected financial statements as well. 

3. Personal and Business Bank Statements.

Most lenders want to see both personal and business bank statements. Be prepared to explain any periods where you were low on cash or went negative.

4. Business License and Registration.

Hate paper records? Your business license and registration are probably online if you haven’t kept a physical copy handy.

5. Articles of Incorporation.

Are you incorporated? Have an LLC? Grab those legal documents! 

6. Your Business Plan.

Make sure you write and edit your business plan. Find other experts and professionals to read through it and find holes before lenders find them. You want to make sure you’ve covered everything that lenders could possibly ask. 

Once you've collected everything, it's time to apply. Get started here and see all of your small business loan options in one place, 

SBA loans are some of the most sought-after forms of small business financing, because of their favorable rates and terms. They also provide small businesses with a premium financial product, without necessarily having the established track record required by banks and traditional financial institutions. For a broader overview of how SBA loans work and what to expect, start with our SBA Loans overview.

However, the SBA loan program has strict eligibility criteria to qualify for 7(a) and 504 loans. As an added layer, the SBA-approved lender who provides your SBA loan will also have their own set of criteria for approval.

In this guide, we’ll break down the general eligibility requirements outlined by the Small Business Administration (SBA), specific criteria for each loan program, and common lender requirements that your small business will have to meet in order to qualify for this government-backed financing.

You’ll learn:

• General SBA loan eligibility requirements (for any SBA loan regardless of type)
• Specific qualification requirements for 7(a) and 504 loans
• What lenders look for, and their requirements to approve an SBA loan

General SBA loan requirements  

Before you can be considered eligible for any SBA loan program, there’s a standard list of eligibility requirements your small business must meet.

Business operations requirements

In order to qualify for an SBA loan, your small business must be:

• An operating business. There are some exemptions for Eligible Passive Companies (EPCs), according to the use of the loan proceeds.
• A for-profit business, officially registered and operating legally. ‍
• Located in, primarily operating in the United States, and authorized to do business in the state or territory where applying for a loan. If the business operates internationally, the loan proceeds can only be used exclusively for U.S. operations.

Size standards

To qualify for an SBA loan, businesses must meet the SBA’s definition of a small business. The business can qualify for this definition in one of two ways - by industry size standards, or by alternative size standards.

Learn more about how the SBA defines a small business.

Industry restrictions

The SBA identifies some business industries, types or characteristics that make them ineligible for SBA loan financing. There are some exceptions to each, but for the most part, if your business is any of the following, you won’t qualify.

• Nonprofit
• Government-owned organization
• Lender, or engages in loan packaging, lending, investment or financing
• Apartment building, mobile home park or nonmedical residential facility
• Developer or landlord leasing land and/or buildings
• Marijuana producer or engaged in the production or sale of marijuana products (some exceptions for hemp products that meet federal definition.)
• Church, synagogue, mosque, or other religious organization
• Business that restricts patronage for any other reason beyond capacity (ex: women’s health club)

Further, if your business engages in any of the following, you won’t qualify.

• Political or lobbying activities
• Gambling
• Illegal activities
• Live adult or lewd performances, services, presentations or displays
• Pyramid or multilevel sales distribution plans

Citizenship requirements

The SBA updated its citizenship eligibility requirements to limit SBA loans to businesses with 100% direct and indirect owners and guarantors who are U.S. citizens, U.S. nationals, or lawful permanent residents ("green card" holders).

A business is ineligible for an SBA loan if any owners or guarantors are “Ineligible Persons”, including foreign nationals, asylum seekers, refugees, visa holders, nonimmigrant aliens, and/or  DACA recipients.

“Credit Elsewhere” rule

If you apply for an SBA loan, you must be able to demonstrate that some or all of the desired funding is not available elsewhere on reasonable terms from non-government sources. In other words, you would not be able to be secure a loan for the amount from a bank or financial institution based on your credit history or other business characteristics. As of June 2025, lenders now assess personal liquidity of owners and guarantors when making the determination if you would be able to meet credit standards from non-government sources.

Going forward, lenders will now certify to the SBA that some of all of the loan is not available from:

• Personal liquidity of owners with 20% or more equity, their spouses and minor children, (with exceptions for reasonable funds to cover future medical, educational and retirement.)
• Conventional lenders or other non-government sources

Your lender will also need to provide detail on the specific factors that demonstrate weakness in your credit for the SBA. Going forward, your lender will not be able to use only your credit score to determine credit weakness.

Business character requirements

In order to be eligible for an SBA loan, your business cannot have any owner incarcerated, on parole, or probation. Criminal history may also prevent qualifying for a loan, depending on the nature of any convictions.

Your business also must be current on any existing government debt obligations, and can not have defaulted on any federal debt that resulted in a loss to the government. This includes prior SBA loans.

Finally, anyone applying for an SBA loan must be current on all federal, state and local taxes, and must have filed federal tax returns to be eligible.

Allowed use of funds

SBA loans have requirements around how funds are used. You can use any SBA loan to:

• Acquire, lease or improve land
• Purchase, convert, expand or renovate one or more existing buildings
• Build new buildings
• Buy or lease equipment or machinery

Each SBA loan program has additional specifications around allowed use of funds. You'll find more detail in the following sections for each loan program.

Guarantee and collateral requirements

Guarantee requirements

All individuals who own more than 20% of the business are required to submit an unlimited personal guarantee to secure an SBA loan, with the exception of SBA Disaster Loans under $200,000. This includes all SBA 7(a) loans, 504 loans, and most microloans.

If you use jointly-owned property as collateral for a loan, your spouse may also have to sign a limited guarantee.

Collateral requirements for SBA loans

Collateral is required for SBA loans in excess of $50,000. Here’s how it works:

To qualify for an SBA loan, there isn't a fixed amount of collateral you have to have. Lenders must use what's reasonable available to secure the loan, even if it doesn't cover the full amount.

So you aren’t required to have a minimum amount of collateral, but you are required to make what you have available depending on the size of your SBA loan.

SBA program specific qualification requirements

In this section, we’ll cover additional requirements beyond the core SBA requirements that apply to 7(a) loans and 504 loans.

SBA 7(a) loan requirements

Once you’ve determined you meet the general SBA loan qualification requirements, there are a few more specific to the SBA 7(a) loan program you’ll need to meet.

Eligible uses of proceeds for 7(a) loans

In addition to the general requirements for use of proceeds, 7(a) loan proceeds can be used for:

• Debt refinancing
• Ownership changes

• Inventory
• Supplies and raw materials
• Working capital

Equity injection rules for 7(a) loans

Equity injections may be required in a few scenarios when applying for a 7a loan. If you’re:

• Starting a brand new business
• Buying an existing business

You’ll typically be required to provide an equity injection (put some of your own money into the business).

Equity injections can be:

• Cash you put into the business
• Seller financing
• Equipment or assets you’re contributing

If you aren’t starting or buying a business, you may not need an equity injection. Your lender will look over whether the existing equity in the business is strong enough. If it is not, you may still be asked to inject equity.

Cash flow requirements for 7(a) loan

When evaluating your application for an SBA loan, lenders will work off the assumption that loan repayment will happen from the businesses cash flow - not assets or collateral. So, if your financials don’t reflect a reasonable ability to repay the loan from cash flow, you won’t be approved.

Credit requirements fo 7(a) loan

The SBA does not require any minimum credit score, time in business, or average monthly sales for 7a loans. However, SBA lenders often have their own requirements for businesses to meet, which we will discuss below.

One notable credit requirement exception is a minimum business credit score (FICO score) of 165 for businesses applying for a  SBA 7(a) small loan. As of June 1, 2025, this increases from the minimum of 155.

SBA 504 Loan Requirements

These loans are intended for small business owners who want to expand their operations. In a nutshell, 504 loans (aka Certified Development Company loans) are laser-focused on real estate.

Eligible uses of proceeds for 504 loans

504 loans are strictly for fixed asset projects, such as:

• Buying land or buildings
• Constructing or renovating facilities
• Purchasing long-term machinery or equipment

Unlike a 7(a) loan, you can’t use a 504 loan for working capital, inventory, refinancing debt that isn’t for financing fixed assets, or buying a business.

Equity injection requirements for 504 loans

Most 504 loan borrowers are required to contribute at least 10% of the total project cost. This is because the loan is a two-part structure between a Certified Development Company (CDC) and a bank or private lender.

The bank typically finances 50%, the CDC finances 40% via the SBA, and you contribute 10-20%.

In some scenarios, you may need to contribute more (15-20%). For example, if your business is a startup (less than 2 years old), or the project involves special-use or limited-market property.

Economic development objectives requirements for 504 loans

504 projects must meet at least one of the following economic development objectives to be eligible for financing:

• Job Creation or retention - the project must create or retain at least 1 job per $90,000 of SBA-guaranteed financing ($140,000 for small manufacturers and energy public policy projects.) In addition, 75% of the jobs must be located in the same community as the project.
• Public Policy goals - The project meets one of the community development or public policy goals outlined by the SBA, including revitalizing a business district of a community, expanding exports, supporting minority, veteran, or women-owned businesses, meeting energy efficiency standards or reducing energy consumption, or supporting rural development.

Net worth and income limits for 504 loans

In order to qualify for an SBA 504 loan, businesses must meet the SBA’s size standards as mentioned before. However, it’s important to note that these cover restrictions on net worth and net income under the Alternative Size Standard. Your business (including associates), must have:

• A tangible net worth of $20 million or less
• An average net income (after federal taxes) for the two full fiscal years before applying of $6.5 million or less. This excludes any carryover losses.

SBA disaster loans requirements

An SBA disaster loan is a low-interest way to recover from the physical and economic damage caused by declared disasters. These loans are open to a more diverse range of businesses than other SBA programs. There are no size restrictions, and private nonprofit organizations, homeowners, and renters can qualify.

You can use a disaster loan for repairing or replacing personal property, real estate, equipment, machinery, inventory, and business assets. Basically, these loans are meant to help you get your operation back where it was before the disaster struck. You’re not allowed to use the funds to try expanding your business beyond where it was pre-disaster.

Here are the 4 main types of disaster loans:

1. Home and Personal Property Loans
To qualify for one of these loans, you aren’t required to own a business. Instead, this program is meant to help a wide variety of victims of a disaster.

2. Business Physical Disaster Loans
For times when a business or organization sustains damage during a disaster, these loans offer up to $2 million to assist in replacing and restoring damaged property. To qualify, you must live in the declared disaster area.

3. Economic Injury Disaster Loans
Not all damage from disasters is of the physical kind. These loans are meant to assist those who may not have experienced physical damage but have still been negatively impacted. If you qualify, you’ll get as much as $2 million to pay for expenses you would’ve been able to handle if not for the disaster.

4. Military Reservists Economic Injury Loans
These loans are meant for business owners who are employing one or more military reservists called to active duty. The SBA provides financing that makes it possible to continue your business operations.

If you have questions about whether or not you are in a presidential and SBA-declared disaster area, you can search by state and territory with the SBA’s online database. Common examples of disasters added to the database include fires, tornadoes, flooding, earthquakes, and drought.

For those who qualify, it’s important to follow the SBA loan requirements as carefully as possible. The first step is registering with the Federal Emergency Management Agency (FEMA). You can do this by calling FEMA at 1-800-621-3362 or visiting DisasterAssistance.gov. Once you’ve received a FEMA registration number, you’ll be eligible to fill out the SBA online application.

Before starting the application, make sure you have this additional information on hand:

• Contact information for all applicants
• Social Security numbers for all applicants
• Employer Identification Number for business applicants
• Deed or lease
• Insurance information
• Business income
• Business account balances
• Business monthly expenses

Once you’ve clicked submit on the application, you’ll need to sit back and wait for the SBA to review your documents and dispatch an inspector. Following an on-site evaluation from the inspector, the SBA will have an estimate for the cost of your damage. You should know that the SBA considers disaster loans a priority, so if you qualify, you’ll get the good news in as little as 3 weeks.

SBA Express Bridge Loans (EBLs) requirements

The Express Bridge Loan (EBL) Pilot Program was created to complement the other disaster loans provided by the SBA. It empowers 7(a) lenders to provide financing on an emergency basis. Of course, the only way to qualify is if the need is tied to a disaster-related purpose.

The key words in the name are “express” and “bridge.” Essentially, these loans provide expedited money to businesses hurt by presidentially-declared disasters. These loans are smaller than most, tapping out around $25,000. The idea is that they help you bridge the gap between the disaster and the arrival of more substantial loans.

This SBA loan program requires that you are located in a primary county or contiguous county that’s been presidentially-declared a disaster area, your business had established a banking relationship with the lender as of the date of the disaster, the funds are used for the survival or reopening of your business, and that the application process must be concluded within 6 months of the qualifying disaster.

Lender requirements for SBA loans

In addition to the eligibility requirements outlined by the SBA, lenders will have their own requirements to qualify for an SBA loan. While these requirements will vary, minimum requirements generally start at:

• Minimum two years time in business
• Credit score of 650+
• $50,000k + annual revenue

As of June 1, the burden is on lenders to verify applicants eligibility for SBA loans, which means your lender will require more documentation from you in areas where the SBA previously handled verification.

Required Documentation

• Six months of business bank statements
• Driver's license or state ID
• Voided check from your business account
• Month-to-date transactions
• Two years of business tax returns
• Two years of personal tax returns from any owners with 20% or more ownership
• Debt schedule
• Year-to-date profit and loss statement
• Year-to-date balance sheet

SBA Loans aren't your only option

While SBA loans are undeniably great, always account for the fact that they take extra time and effort to obtain. You can’t simply stroll along and expect positive results. Do your homework to find the best option, then meticulously gather all the required documents.

Ultimately, the biggest SBA loan requirement is patience. If time is limited and you don’t want to wait for the lengthy SBA approval process, there are other excellent loans you may want to consider. These alternatives include short-term loans, revenue-based financing, equipment financing, and accounts receivable financing.

Each loan product has its pros and cons, which is why it can be helpful to get an expert’s opinion. For questions about a broader range of loan products, including short-term loans and other non-SBA options, feel free to talk to the experts at Lendio. We can answer any questions you have and guide you to the best choice for your needs.

Being your own boss can offer freedom and flexibility. Yet self-employment also comes with many challenges—especially where business funding is concerned. Fortunately, SBA loans can offer a pathway to affordable financing for freelancers, independent contractors, and other small business owners. But there are drawbacks to this type of funding as well. 

This guide covers how SBA loans work for self-employed business owners along with eligibility requirements and application tips. Plus, learn about alternative financing options available for self-employed individuals in case an SBA loan isn’t the right fit for you.

Understanding SBA loans for self-employed individuals

SBA loans are government-backed loans designed to help small businesses access critical funding to start, grow, and expand. Because the federal government helps guarantee SBA loans, they involve less risk and lenders can offer borrowers better terms including:

• Lower interest rates 
• Reduced fees
• Longer repayment terms
• Lower down payments. 

Both traditional and self-employed small business owners—such as sole proprietors, independent contractors, and freelancers—can apply for SBA loans. 

However, self-employed applicants may find it harder to qualify due to inconsistent revenue, limited collateral, or difficulty satisfying other eligibility requirements on SBA loan applications. (See below.)

Eligibility requirements for self-employed SBA loan applicants

As a self-employed business owner, especially a sole proprietor, banks may be hesitant to lend you money according to the SBA. Keep this detail in mind when you choose your business structure if you think you might want to access financing—now or in the future.

All borrowers, self-employed or otherwise, need to satisfy certain criteria when they apply for an SBA loan which can vary by loan program and lender. Typical minimum SBA loan requirements include:

• Own a legally registered, for-profit business located in the U.S. (or U.S. territories)
• Operate a business that doesn’t exceed SBA small business size standards (based on revenue or employee count)
• Have good credit scores (personal and business) 
• Provide enough collateral to secure loan
• Demonstrate you’re unable to access similar financing elsewhere
• Prove you don’t operate an ineligible business type for SBA loans
• Provide a personal guarantee from anyone with 20% or more ownership

SBA lenders often add borrowing requirements in addition to those above. For example, your business may need a minimum amount of revenue to qualify for certain SBA loans. Many lenders also require applicants to have at least two years in business for an SBA 7(a) or 504 loan, though some SBA loans for startups may be available after as little as six months.

Types of SBA loans available for independent contractors

If you’re considering an SBA loan as a self-employed business owner, here are some financing options to research further. 

SBA Microloan

SBA microloans could be a solid funding resource for self-employed business owners who don’t need access to particularly large loan amounts. Highlights of these loans include: 

• Loan amount: Up to $50,000
• Average loan size: Around $13,000
• Interest rate: 8%-13% (at time of writing)
• Repayment term: Up to 7 years

Microloans are available through nonprofit intermediary lenders—community-based organizations that help eligible small business borrowers access vital financing for working capital, inventory, supplies, equipment, and other essential business needs.  

SBA 7(a) small loan

Another affordable financing solution to consider as a self-employed business owner is the SBA 7(a) small loan. Key features of the loan include:

• Loan amount: Up to $500,000
• Collateral: May not be required for loans of $50,000 or less
• Interest rate: Negotiable between lender and borrower

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Your creditworthiness and other factors help determine your APR and other loan terms. But lenders can’t charge you more than the SBA maximum. So, the loans should still be affordable compared to other business loans.

SBA Express loan

The SBA Express loan is a type of 7(a) loan that could work well for self-employed business owners who need access to fast funding. Loan highlights include:

• Loan amount: Up to $500,000
• Collateral: Typically not required for loans of $50,000 or less
• Approval time: Potentially within 36 hours

SBA Express loans also feature less paperwork compared to other SBA loan applications. Applicants only need to fill out SBA Form 1919 and complete any other lender-specific paperwork and documentation requirements. If an application qualifies for the loan, the full SBA Express Loan process could take as little as 30 days to complete.

SBA 504 loan

The SBA 504 loan program might also be worth considering for certain self-employed borrowers that need financing to build, improve, or refinance owner-occupied commercial real estate. Key loan features include: 

• Loan amount: Up to $5.5 million
• Down payment: 10%-15% (for businesses established two years or less)
• Repayment term: Up to 25 years

SBA 504 loans involve both a Certified Development Centers (CDCs) and a private lender, making the loan process more complex and time-consuming. If you qualify for this type of financing, it could take several months to complete the loan process.

SBA loan application process for self-employed individuals

Whether you’re self-employed or own a more traditional small business, the SBA loan application process may be intensive. But if you’re willing to put in a bit of legwork, your effort could be worthwhile to secure competitive business financing. 

Below are the basic steps of applying for an SBA loan while self-employed. 

1. Choose the right SBA loan. The SBA backs multiple types of loans. Different loan programs may work better for you depending on your needs and the eligibility criteria. 

2. Review eligibility requirements. Get a general idea of the minimum loan requirements you’ll need to satisfy before applying.

3. Check your credit. Review your personal and business credit scores before applying. (Tip: the minimum FICO SBSS score for an SBA 7(a) loan is typically 155.)

4. Prepare documentation. Be prepared with your business plan, financial paperwork (bank statements, business and personal tax returns, profit and loss statement, balance sheet, etc.), list of collateral, and other supporting documents. Preparing key information ahead of time could improve your chances of a successful loan application.

‍5. Choose an SBA-approved lender. There are several ways to find an SBA lender including searching for an online lender, working with a local bank or credit union, or using the SBA’s lender match system. Remember to compare offers to find the best deal for your situation.

Alternatives to SBA loans for self-employed borrowers

If you can’t find an SBA loan that works for you, here are some alternative borrowing solutions to consider.

• Business credit cards: A business credit card is a type of credit card designed for business use rather than personal expenses. Even as a self-employed business owner, these flexible spending accounts may be easier to qualify for compared to business loans—especially if you have good personal credit. But beware of personal guarantees and higher interest rates with these accounts.
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• Personal loans: Personal loans may be used for startups and businesses with revenue challenges, a lack business credit history, or little time in business. On the negative side, lenders may restrict how you can use the money you borrow with personal loans and you’re personally liable for the debt. According to the Federal Reserve, around 86% of entrepreneurs rely on personal credit (including personal loans) to finance their small businesses when they can’t access business credit. 
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• Online lenders: Business financing from an online lender could offer a variety of funding solutions such as business term loans, equipment loans, business lines of credit, startup business loans, and more. However, while eligibility criteria tends to be more lenient compared to traditional banks and credit unions, you may also face higher interest rates and shorter repayment terms.

Facing an SBA loan default can be a daunting experience, but you aren't alone. In February 2025, a Senate Committee hearing was held to discuss the ballooning rate of early defaults in the SBA 7(a) loan program. In 2024, over 1% of small business owners defaulted on their SBA loans in the first 18 months.

If your small business is at risk of defaulting, or has already defaulted on your SBA loan, understanding the implications and exploring available options can provide a path forward. This guide will cover what happens if you default on an SBA loan, managing SBA loan defaults, and your options for next steps.

What is an SBA loan default?

An SBA loan default happens when a borrower has continually failed to make the agreed-upon payments, and hasn't come to any resolution with their lender. Defaulting on an SBA loan, or any loan, can have negative impacts on your business, and potentially lead to steep legal or financial consequences. 

If you're worried you may not be able to make your agreed-upon payments, reach out to your lender to explore your options before the situation progresses to a default.

The difference between SBA loan default and SBA loan delinquency

As mentioned above, a default happens when you missed your payments and haven't worked things out with your lender. However, an SBA loan doesn't go into default immediately. 

Before this stage, usually when you first miss payments, your loan will be classified as delinquent. Your lender will begin to reach out over missed payments. After a period of time, on average three to four months, your loan will default if you have not paid your past due amount or contacted your lender.

What happens if an SBA loan goes into default?

Once an SBA loan goes into default, things get serious. Although time frames will vary depending on lender and loan terms, usually a lender will issue a formal demand letter for the amount due. You will then have 30-45 days to pay the entire amount.

Failure to do so means the lender can use several other measures to collect the amount due.

Asset Seizure

Any collateral that you used to secure your loan, such as business bank accounts, real estate, inventory, or equipment, can be seized by the lender and sold to recoup their losses.

A lender can also seize and sell your personal assets if you’ve filled out an SBA loan personal guarantee. The personal guarantee form is required for most SBA 7(a) loans from anyone who owns 20% or more of the business. This also applies to any other owners or individuals who signed personal guarantees.

Depending on asset seizure specifics, or if the assets seized are not enough to cover paying off the loan in full, you may face lawsuits at this stage.

Lender files with the SBA

The lender will also file a claim with the SBA for the guaranteed portion of the loan, and turn the remainder over to the SBA, who will take over attempts to collect on the loan. Generally, a borrower must be in default for more than 60 calendar days before a lender can put in a loan purchase request with the SBA.

SBA takes over account and attempts to collect

The SBA will repay the lender the guaranteed portion of the loan to recover their losses, but will continue to attempt to collect payment from you. In most cases, the SBA will issue a 60-day demand letter, which details that you must respond within 60 days, or your account will be turned over to the U.S. Treasury Department. At this point, you can repay the loan, or submit an offer in compromise.

Submitting an offer in compromise (OIC) is an option when you have genuine financial hardship. It's a settlement that the SBA will consider for eligible businesses, but it's not guaranteed, and the amount of forgiveness that the SBA will consider is subject to a number of factors.

The U.S. Treasury will step in

If payment and settlement is not reached, the SBA can contact the Treasury Department with either a notice to the Treasury Offset Program (TOP) or an Administrative Wage Garnishment (AWG) notice to an employer. With the former, the TOP allows the government to take a portion of federal wages or social security benefits that you're owed, as well as seize vendor payments and/or income tax refunds. 

An AWG allows wages to be garnished for up to 15% of disposable income (net pay after deductions). There is no statute of limitations for either TOP or AWG methods, and they will remain in place until the debt is paid, including interest and collection fees.

Communicate with your lender if you can't pay back a small business loan

Taking immediate action is crucial when you face a situation where you can't pay back a small business loan, as the consequences can escalate rapidly. Communicating clearly and transparently with your lender helps you both explore alternative solutions, such as restructuring payment terms, or arranging a temporary deferment until you can resume payments.

Maintaining communications also demonstrates your goodwill, which can help prevent the situation from progressing to more drastic collection methods.

Usually, a lender can offer two main types of assistance in this situation. Loan modification, or loan deferment, to help you through the situation until your business is in a better state to manage payments.

Loan modification

A loan modification refers to changes to the terms of the loan. For example, your lender could give you a term extension to push back the loan maturity date. This approach can provide immediate relief by reducing the size of your periodic payments, which can ease the cash flow burden on your business. 

Lenders may temporarily or permanently alter interest rates, which can lower repayment costs. Some lenders may also consider offering a temporary reduction in interest payments, with any deferred amounts added to the loan balance. However, it's important to thoroughly discuss these options with your lender to understand the long-term implications. Modifications can extend the loan duration and affect your future business financial planning.

Loan deferment

A loan deferment can work as a short-term solution for businesses in a difficult period of cash flow. Typically, a lender can defer your loans for repayment for three, six or sometimes even twelve months.

Your lender often provides you with short-term solutions to bridge financial hardship when it comes to paying your SBA loan back. If this is simply not an option, then these solutions will only delay the inevitable. In this case, if you cannot repay your loan, then proactively pursuing an Offer in Compromise with the SBA is a route to settle your debt for less than the owed amount.

The bottom line

Defaulting on an SBA loan can have serious repercussions both personally and professionally. However, by understanding the default process and proactively seeking solutions, before the situation progresses too far, you can navigate these challenges more effectively. 

Explore all options, maintain communication with lenders, and seek professional assistance when necessary. These steps can lead to a resolution that aligns with your financial and business goals, helping you regain control and stability.

To learn more about managing SBA loan defaults and discovering potential pathways for debt relief or forgiveness, consider reaching out to financial advisors who specialize in small business loan challenges. Your journey to financial stability and business success is not one you have to navigate alone.

Need quick, flexible financing for your small business? An SBA line of credit might be your best bet.

SBA lines of credit offer low interest rates, government-backed security, and the ability to draw funds as needed. They're perfect for covering cash flow gaps, seasonal expenses, and unexpected costs.

How do you qualify? And which SBA line of credit is right for you? We'll break it down below.

What is an SBA line of credit?

The Small Business Administration (SBA) offers an SBA line of credit through its SBA CAPLines program—a subset of the SBA 7(a) program, which is designed to provide ongoing working capital to small businesses. The SBA offers both revolving and fixed lines of credit options to choose from.

Revolving line of credit

A revolving line of credit works much like a credit card. It offers a source of funds that the borrower can draw from as needed. The main advantage of a revolving line of credit is its flexibility. You can access the funds, repay the amount used, and then draw again, as long as you don’t exceed your credit limit. This type of line of credit is especially useful for businesses with fluctuating cash flow needs.

Fixed line of credit

On the other hand, a fixed line of credit—also known as a traditional or standard line of credit—works differently. Once the funds have been drawn and utilized, they can’t be accessed again, even after repayment. This type of credit is most suitable for businesses with predictable and steady financial needs. It provides a one-time lump sum of money that is repaid over a set term.

SBA loan vs. SBA line of credit

While both SBA loans and SBA lines of credit provide small businesses with the financing they need, they differ significantly in structure and usage. An SBA loan is a lump-sum amount borrowed at one time and repaid in fixed monthly installments, often used for significant, one-time expenses, such as purchasing equipment or real estate.

On the other hand, a line of credit offers more flexibility. It establishes a maximum loan balance and allows businesses to draw funds as needed, making it ideal for managing cash flows or unexpected business expenses. Because of this flexibility, an SBA line of credit often has a slightly higher interest rate than an SBA loan.

Types of SBA CAPLines

SBA offers four types of CAPLines up to $5 million to meet different business needs:

• Seasonal line of credit – This type of line is suitable for businesses that experience seasonal changes in their cash flow, such as retail or tourism businesses.
• Contract line of credit – This type is ideal for businesses that need funds to finance specific contracts or projects.
• Builders’ line of credit – This type is designed for businesses in the construction industry to cover the costs of labor, materials, and other expenses.
• Working capital line of credit – This general-purpose line of credit is built to support ongoing business operations.

SBA Express Line of Credit

In addition to the four types of SBA CAPLines, the Small Business Administration also offers an SBA Express Line of Credit. 

This type of funding offers expedited processing times, making it an ideal solution for businesses in need of quick access to capital.

The SBA Express Line of Credit provides a guarantee of 50% on loans up to $500,000, with a maximum term of 10 years. 

The key advantage of the SBA Express Line of Credit is its accessibility—with a simplified application process and faster approval times, businesses can have access to the funds they need when they need them.

SBA 7(a) Working Capital Pilot program

The SBA’s 7(a) Working Capital Pilot program was designed for modern small businesses—offering monitored lines of credit within the 7(a) program.

There are a number of more evolved features that the WCP program adds on top of the existing 7(a) line, including:

• A different fee structure: The fee structure for WCP is modeled after the SBA’s 7(a) Export Working Capital Program (EWCP).
• Support for transaction-based lending and asset-based lending.
• One-on-one counseling with SBA experts.
• The ability to provide working capital for domestic and international orders under a single loan.

To be eligible for the SBA WCP, you’re required to have been in business for at least one year. The maximum loan size is $5,000,000, with maturity up to 60 months. Interest rates for WCP loans are currently the same as the existing 7(a) rates (see below).

As of August 2024, all existing lenders approved to process 7(a) loans were able to begin providing Working Capital Pilot loans as well.

Interest Rates

The interest rates for an SBA line of credit vary but are typically lower than traditional bank loans. The rates are determined by the lender and depend on factors such as the borrower’s credit score, financial history, and the type of line of credit chosen.The interest rate for an SBA line of credit is usually expressed as Prime +.

The “Prime” refers to the current prime rate, which is a benchmark interest rate used by lenders. The “+” indicates a percentage that is added on top of the prime rate. This additional percentage varies depending on the amount of credit line and the lender’s assessment of the borrower’s creditworthiness.

Terms

The terms for SBA CAPLines also vary, with a maximum repayment period of up to 10 years.

However, there’s an exception for the builder’s line of credit. This specific CAPLine has a maximum repayment period of up to five years, or the time it takes to complete the construction or renovation project, whichever is less. This exception is designed to match the repayment period with the completion of the project, ensuring that businesses are not overburdened with repayments post-project completion.

SBA line of credit requirements

To qualify for an SBA line of credit, businesses must meet certain eligibility criteria, such as:

• Being a small business located in the United States
• Having good personal and business credit scores
• Being able to demonstrate the ability to repay the loan

While the general eligibility criteria apply to all SBA CAPLines, there are some specific qualifications depending on the type of CAPLine:

• Seasonal CAPLine – To qualify, businesses should demonstrate a definite pattern of seasonal activity, with an operating cycle of not more than 12 months. The business should also have been in operation for at least one year.
• Contract CAPLine – To be eligible, businesses must have specific contracts or orders that the funds will be used for. The repayment comes from the contract’s proceeds.
• Builders CAPLine – This CAPLine requires businesses to be involved in building or renovating commercial or residential buildings. The repayment comes from the conversion of construction loans into long-term financing or the sale of the residential or commercial property.
• Working CAPLine – Businesses must have inventory or accounts receivable.

For all CAPLines, you’ll need to provide collateral that can be liquidated by the lender if the loan is not repaid. The collateral requirements may differ based on the specific CAPLine, the amount borrowed, and the lender’s policies. Remember that every lender may have slightly different criteria for qualifying businesses, so you should always speak to your lender to understand the specific requirements.

How to apply for an SBA line of credit.

Applying for an SBA line of credit is similar to applying for any other loan. The first step is to find a lender that offers SBA CAPLines and meet their eligibility criteria.

Once you have found a suitable lender, you will need to gather the necessary documents, such as financial statements, tax returns, and business plans. You may also need to provide collateral for the line of credit.

After submitting your application and supporting documents, the lender will review your application and make a decision. If approved, you can start using your line of credit to support your business’ ongoing needs.

Conclusion

In conclusion, an SBA line of credit can be a valuable tool for small businesses looking for flexible and affordable financing options. With various types of CAPLines available and competitive interest rates, it is worth exploring as a potential funding source for your business. Learn more about SBA loans.

Understanding how small business financing impacts tax strategy and preparation is essential for business owners and financial managers seeking to optimize their tax strategy and improve financial planning. Business loans play a critical role in supporting small businesses by providing the necessary capital, but the associated tax implications can be complex.

Some of that complexity comes from different loan product types that a small business may obtain, and whether interest or payments can be deducted from taxes. In this article, we'll cover common business loan types and their tax implications, the criteria for claiming interest tax deductions, business loan payment deductions, and common mistakes to avoid when filing your taxes.

Are business loans taxable?

Business loans are not considered taxable income, because they represent borrowed funds that the business is obligated to repay. When a business receives a loan, the principal of the loan does not count as income for tax purposes, since the amount received isn't earned -- it's borrowed.

However, while the principal is not taxable, the interest paid on the loan might be eligible for tax deductions. Small businesses often deduct interest paid on a loan as a business expense, as long as criteria are met, which we will cover in section 2. By deducting interest payments, businesses can reduce their taxable income, lowering the tax burden.

What types of business financing are considered taxable?

There are situations where business financing becomes taxable income. For example, if a lender forgives or cancels a loan, the amount forgiven could be considered taxable income for the business. A recent example is Paycheck Protection Program (PPP) loans issued during the COVID-19 pandemic.

Many businesses applied for and received loan forgiveness for their PPP loans, becoming eligible to exclude the amount forgiven from taxable income. However, the IRS found recurrent instances where PPP loans were improperly forgiven, because the applicant did not meet the criteria for forgiveness through misrepresentation or omission. Businesses that were found to have improperly forgiven PPP loans were instructed to include the amount forgiven in their income and pay any additional income tax assessed.

Another situation where financing might be considered taxable is if it is used for non-business purposes. In this case, any interest paid on the loan would not be tax deductible and could be subject to taxes. These situations underscore why it is important for businesses to carefully consider tax implications when seeking financing, and ensure they are using funds appropriately, and in line with requirements set by lenders or government programs.

When in doubt, a professional tax filing service can be a big help. Lendio is proud to partner with Taxfyle, a real-time tax filing app that helps small businesses file taxes with the help of a dedicated CPA or EA professional.

Common business loan types and their taxability

Small businesses can find a wealth of loan types to increase their working capital and invest in growing their business. That's why it's essential to understand how each can impact your taxes and overall financial strategy. Below are some common types of small business financing, and considerations for their tax implications.

Business Term Loan

Business term loans are a lump-sum financing payment for small businesses that usually come with a fixed interest rate and repayment schedule over an agreed term. The interest paid on these loans is usually deductible as a business expense, reducing taxable income.

Business Line of Credit

Business lines of credit provide flexible access to capital. Small businesses can borrow as needed, up to a negotiated limit, and interest is paid only on what amount is used. The interest on the amount withdrawn is often deductible, provided it is used for legitimate business purposes.

Equipment Financing

Equipment financing is tied specifically to purchasing or leasing equipment, and the tax implications are two-fold. Both interest paid on the financing and depreciation of the asset may offer tax deductions to the business.

Revenue-Based Financing (BCA/ MCA)

Revenue-based financing, or cash advance, is a more unique form of financing, in that repayment is linked to future sales. Because of this model, these are not technically loans, and the associated fees may not qualify for interest deductions on taxes.

SBA Loans

Small Business Administration (SBA) loans provide favorable terms and low interest rates to borrowers, and these interest payments are generally deductible.

Deducting business loan interest: what's eligible?

An interest tax deduction is a valuable tool for small businesses looking to reduce taxable income. To claim these deductions, it is essential to first understand the criteria set by the IRS.

Conditions for interest payment deductibility

Small businesses can generally deduct some or all of the interest paid or accrued during a tax year on loans. However, you can only deduct the interest if you meet the following criteria:

• You are legally liable for the debt
• Both you and the lender intend the debt to be repaid
• You and the lender have a true debtor-creditor relationship

If you have received business financing and are using it for business-related expenses or purposes, this is fairly straightforward. There are some exceptions where deductibility is concerned to be aware of.

Exceptions to interest deductibility 

Gross Receipts over $29 million

The IRS provides a small business exemption for businesses with average annual gross receipts of $29 million or less over the past three years. If a business has more than $29 million in gross receipts, they may be limited on how many interest deductions they can claim. Form 8990 will help you determine if you must limit your business interest expense deductions and whether your business qualifies to elect out.

Part-Business, Part-Personal Loans

In some cases, a loan may be for both business and personal reasons. A common example is a car loan. If you use the car for business purposes and personal purposes, you can only deduct the interest on the percentage of business use for the car, not on the entire interest of the loan for the year.

Tracking and documenting business financing for taxes

Accurate tracking and documentation of business financing is important for small businesses to maintain, in order to optimize tax deductions and ensure compliance with the IRS. Record-keeping involves maintaining detailed accounts of all loan-related transactions, including:

• Original loan agreement
• Interest payment records
• Correspondence with lenders
• Repayment schedules
• Use of borrowed funds

By keeping these records organized and frequently updated, small businesses work toward managing business taxes well, and substantiate any deduction claims when filing their taxes. It also allows financial planning to maximize the potential for interest and payment deductions, as well as mitigate risks.

Expert tips for optimizing tax efficiency

Tax efficiency should be a goal of small businesses, especially during seasons when margins can be tight. Here are some tips to help you navigate some common financing-related tax mistakes that can affect your financial statements, and make tax season a real headache. 

Common Mistakes to Avoid

1. Misclassifying Expenses

A common mistake small businesses make when filing their taxes is mislabelling expenses, or categorizing them incorrectly. This can cause inaccurate financial records, and potentially disallow tax deductions that could reduce tax burden. The most common misclassification is classifying a personal expense as a business expense. Doing this can cause issues and potential penalties during an IRS audit. 

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Tip: Keep careful records with clear classification of expenses using accounting software or a dedicated financial professional. This will make reducing tax errors easier, and also give you more accurate insights into your operational costs and overall financial health.

2. Not reconciling loan interest correctly

As a practice, small businesses should keep careful records of each interest payment associated with a loan. When records aren’t properly updated or kept, discrepancies may appear on financial statements and in your tax filing, resulting in missing out on eligible deductions or even overpayment. Mismatched records may also be flagged during an IRS audit.

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Tip: Regularly update and review your financial records, particularly where loan interest payments are concerned. This provides clear visibility both for your business, and the IRS.

3. Reporting loan forgiveness incorrectly

If your business receives loan forgiveness, it is important to assess whether it needs to be reported as taxable income. Failing to do this can lead to serious tax implications, including penalties and interest owed. The PPP loan example above is a cautionary tale. Most cases of debt forgiveness or cancellation require you to include the cancelled amount in income, with some exceptions like bankruptcy or insolvency. IRS Publication 4681 offers guidance on canceled debts and exceptions. 

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Tip: Maintain accurate financial records and any correspondence or documents provided by the lender forgiving or cancelling the debt. Consult with a tax professional to determine if your forgiven loan should be reported as taxable income, and ensure compliance with IRS regulations.

Should you work with a tax professional?

Navigating business loan tax implications can be daunting for even the most experienced business owner. A tax professional can be an invaluable resource in optimizing your financial strategies, while ensuring you remain in compliance with IRS regulations.

But keeping a dedicated finance professional on the payroll can be a tough order for small businesses. That’s why services like Taxfyle, Lendio’s trusted partner,  can help small business owners immensely navigate tax filing, especially where business financing comes into play.

Taxfyle connects you to a licensed CPA or EA who will prepare and file your business tax return for you, looking for maximum eligible deductions, qualifying credits and filing with accuracy.

If you’re concerned about the state of your books, Taxfyle’s cleanup bookkeeping will organize your records, fix errors, and get your finances tax-ready before it’s time to file.

Want to learn more about Taxfyle? Visit www.taxfyle.com for more information. Lendio customers can get a discount on business tax filing services. Click here to get your code for 10% off!

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You might be worried your small business may face a huge tax bill, or perhaps you’ve received one already. Either way, if you feel you’re unable to pay your tax bill in full, there are options available to help you manage your tax debt and avoid high-interest penalties. Whether you explore an IRS payment plan, or seek a business loan to cover your tax debt, we’ll discuss your options in this article.

The tax dilemma for small business owners

Approaching tax debt can cause a dilemma for small business finances. On one hand, business owners want to keep their tax bill payments as low as possible to maximize profits, maintain cash flow, and keep growing their business. On the other hand, SMBs also need to ensure they pay off their tax debt quickly to avoid potential penalties from the IRS.

Tax payment options for small businesses

There are a few options to keep in mind when deciding how to pay your tax debt to the IRS. You can opt for an Installment Payment Agreement (IPA) with the IRS. Another option is an Offer in Compromise (OIC) with the IRS, if your business qualifies for the program. A third option is seeking a business loan to cover your tax debt.

IRS payment plan

Most business taxpayers can obtain a long-term payment plan (or installment agreement) from the IRS, as long as they have a total balance less than $25,000 in combined tax, penalties and interest from the current and preceding tax year. With a payment plan, business owners can make monthly payments for up to 24 months on their tax debt. 

Even if you have a payment plan, The IRS assesses interest every day that your payment is overdue. The 2025 rate for underpayment is 7 percent. Since interest compounds daily on IRS payment plans, you could pay much more than you originally owed.

Pros and cons of an IRS payment plan

Offer in compromise 

An offer in compromise is a program offered by the IRS to allow eligible individuals to settle their tax debt for less than the full amount owed. An offer in compromise is most often used when businesses cannot pay their full tax debt, or paying the full debt creates financial hardship.

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Eligibility requirements for an offer in compromise include:

• You’ve filed all required tax returns and made all required estimated payments.
• You aren’t in an open bankruptcy proceeding.
• You have a valid extension for a current year return, if you’re applying for the current year.
• You are an employer and made tax deposits for the current and past 2 quarters.

An offer in compromise application is more likely to be approved when small business owners offer the most the IRS can expect to collect within a reasonable period of time.

Obtaining a business loan for tax payment

A business loan can be a good choice for small business owners facing significant tax payments. While IRS payment plans have pre-set terms, business loans can offer greater flexibility in terms of a repayment schedule. For industries with irregular income streams, a business loan could also allow owners to align the repayment schedule with their cash flow cycles.

When is a business loan better than an IRS payment plan for paying tax debt?

For business owners with strong credit scores, a business loan might offer more favorable terms, such as lower interest rates compared to IRS underpayment penalties and interest rates. Many business loans can also provide immediate access to capital with a lump-sum payment, allowing businesses to take care of their tax obligations promptly, and potentially use additional funds for working capital and other business needs.

Best business loans to pay taxes

When business owners face the burden of paying taxes, assessing the best business loans for the task and their business profile is important. Factors to consider when borrowing are favorable interest rates and flexible repayment schedules, so that businesses can pay off their liability without straining cash flow.

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The length of the application process and approval process with each lender may be especially important too, especially with tax deadlines looming. Before applying for a loan, assess your financing needs, your businesses’ financial health, and IRS requirements for your repayment to determine the right loan option for you.

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Here are some loan options and financing structures that can help you tackle IRS debt repayment while freeing up working capital for your business. The terms and repayment options vary for each type of loan or financing.