Lending Library

SBA loan terms refer to the maximum repayment periods allowed under SBA loan programs, which vary based on the loan type and how the funds are used. The SBA sets term limits to align repayment length with asset lifespan and borrower repayment ability, rather than allowing arbitrary loan durations. 

Current as of January 2026

SBA loan terms and duration are established by the U.S. Small Business Administration and do not change on a regular schedule. As of this update, there have been no changes to maximum SBA loan terms for the 7(a), 504, or Microloan programs.

Quick summary.

• SBA loan terms range from up to 6 years to up to 25 years
• Longer terms apply to real estate and major fixed assets
• Shorter terms apply to working capital and revolving needs
• Lenders must use the shortest appropriate term under SBA rules
• Term length affects monthly payment size, not just total cost

SBA loan term limits by program.

Based on SBA program guidance from the U.S. Small Business Administration.

SBA 7(a) loan program - term limits by type and use of funds.

Under the SBA 7(a) program, maximum loan terms depend on the program, loan structure, and how the loan proceeds are used.

Important notes on 7(a) program term limits:

• Maximum term length is determined by use of funds, not just loan program.
• When IRS useful life estimate is referenced, the asset’s estimated life must support the extended term.
• SBA lenders must generally use the shortest appropriate repayment term allowed under SBA guidelines.
• Construction or renovation periods are separate from loan amortization. When construction or renovation is included in the use of proceeds, the SBA allows an additional period reasonably necessary to complete that work to be added before amortization begins.

SBA 7(a) Standard loan term limits.

SBA 7(a) loan terms vary based on how funds are used rather than a single fixed maturity.

In general:

• Working capital and inventory loans are capped at up to 10 years.
• Equipment terms may extend up to 15 years if supported by IRS useful life estimates.
• Real estate-related uses may extend up to 25 years, with construction or renovation time added where applicable.
• Farm-related uses follow separate term limits for land, structures, and equipment.

See the table above for use-specific maximums.

SBA Express loan term limits.

SBA Express loans follow different maturity rules depending on whether they are structured as a term loan or a line of credit.

• Term loans follow the same maturity limits as Standard SBA 7(a) loans, based on use of funds, with maximum terms ranging up to 25 years for real estate-related uses.
• Lines of credit, whether revolving or non-revolving, have a maximum maturity of 10 years.

For revolving lines of credit:

• The revolving period is limited to up to 5 years
• During this time, funds may be drawn, repaid, and re-borrowed
• After the revolving period ends, any outstanding balance is converted to a non-revolving loan and must be fully repaid within the 10-year total maturity limit

For non-revolving lines of credit:

• Funds may be drawn up to the approved limit
• Re-borrowing is not permitted
• The line must be fully repaid within the 10-year maturity limit

SBA CAPLines term limits.

SBA CAPLines are designed for short-term and cyclical financing needs, and have program-specific maximum maturities, depending on the type of CAPLine:

• Builder’s CAPLine loans are capped at up to 5 years
• Working Capital, Contract, and Seasonal CAPLines may extend up to 10 years

These maturity limits define the maximum legal repayment period for each CAPLine program.

Seasonal CAPLine Clean-Up requirement.

Seasonal CAPLines include a mandatory clean-up period each season. The borrower must reduce the outstanding balance to $0 for a minimum of 30 consecutive days. This demonstrates that the business is not dependent on borrowed funds year-round, but instead uses the CAPLine to support seasonal operating cycles.

CAPLines exit strategy requirement.

All SBA CAPLines require a defined exit strategy. The final advance under the CAPLine must occur far enough in advance of the maturity date. This ensures any assets acquired or financed through the CAPLine can be converted back into cash. This converted cash must be sufficient to fully repay the loan balance by maturity. 

SBA Export Express term limits.

SBA Export Express loans have different maturity limits depending on how the loan is structured.

• When structured as a term loan, Export Express loans follow the same maturity rules as Standard SBA 7(a) loans, with maximum terms based on use of proceeds and extending up to 25 years for eligible real estate uses.
• When structured as a line of credit, the maximum maturity is 7 years, regardless of whether the line is revolving or non-revolving.

For Export Express lines of credit:

• Funds may be drawn up to the approved limit
• Revolving and non-revolving structures are permitted
• The full balance must be repaid within the 7-year maturity limit

International Trade Finance term limits.

International Trade Finance loans follow the same maturity rules as Standard SBA 7(a) loans.

• Maximum loan terms are determined by use of proceeds
• Real estate-related uses may extend up to 25 years
• Equipment and working capital uses follow standard SBA 7(a) limits

The International Trade designation affects eligibility and purpose, but does not alter maximum maturity limits. 

Export Working Capital Program (EWCP) loan term limits.

Export Working Capital Program (EWCP) loans are designed for short-term, transaction-based export financing and have a maximum allowable maturity of 36 months.

Actual loan terms are often shorter and depend on the structure of the EWCP loan.

Transaction-specific EWCP loans.

When an EWCP loan is structured to support a single export transaction:

• The loan term may extend up to 36 months
• Any maturity longer than 12 months must be supported by lender documentation and justification to the SBA
• The term is tied to the lifecycle of the underlying export transaction

Transaction-based EWCP lines of credit.

When structured as a transaction-based line of credit:

• The loan term is typically up to 12 months
• The line may be approved for up to 36 months through annual renewals
• Each renewal is treated as a new loan, subject to new SBA guarantee fees

Asset-based (ABL) EWCP loans.

Asset-based EWCP loans follow a similar renewal structure:

• Typically issued with a 12-month term
• May be renewed annually for up to 36 months total
• Each renewal is treated as a new loan and requires a new SBA guarantee

Important notes on EWCP maturity:

• The 36-month limit represents the maximum allowable maturity, not a guaranteed loan length.
• EWCP loans are structured as self-liquidating, short-term financing tools
• EWCP renewals are treated as new loans. Each renewal is subject to a new SBA guarantee fee and independent approval.

Manufacturers’ Access to Revolving Credit (MARC) loan term limits.

MARC loans follow different maturity rules depending on whether they are structured as a term loan, or a revolving loan.

• Term loans have a maximum maturity of 10 years. 
• Revolving loans have a maximum maturity of 20 years.

For revolving loans:

• The revolving period is limited to up to 10 years.
• During this time, funds may be drawn, repaid, and re-borrowed.
• After the revolving period ends, any outstanding balance is converted to a non-revolving loan and must be fully repaid within the 20-year total maturity limit.

SBA 504 loan program - term limits by type and use of funds.

SBA 504 loans provide long-term, fixed-rate financing for major fixed assets. Term lengths are standardized at 10, 20, or 25 years, depending on the project and asset type.

• Fixed-rate, asset-based financing
• Term tied directly to asset class:
  
  • 10 years - equipment (but could qualify for 20-25 years depending on useful life)
  • 20-25 years - real estate
• When the 504 loan is used for mixed assets, such as real estate and equipment, the term of the asset that the majority of the funds are used for will apply.

SBA Microloan loan program - term limits.

SBA Microloans are capped at up to 10 years, regardless of use of funds, reflecting their role as small-dollar, short-term financing.

What determines the length of an SBA loan?

SBA loan terms are determined by four primary factors:

1. SBA loan program rules
2. Use of proceeds
3. Asset type and useful life
4. Structural requirements defined by the SBA

Loan length is not determined by borrower preference alone, and longer terms are not automatically available for all uses.

What longer vs. shorter SBA loan terms mean in practice

• Longer terms = lower monthly payments, longer payment horizon
• Shorter terms = higher monthly payments, faster payoff
• Term length does not change SBA eligibility rules

What SBA loan length does not tell you.

An SBA loan’s maximum allowable term does not:

• Guarantee approval for that term length
• Indicate interest rate or total cost
• Replace lender underwriting requirements
• Apply uniformly across all loan structures

Why SBA loan length rules are often misunderstood.

SBA loan term rules are frequently misunderstood because:

• Maximum maturities vary by use of funds, not just program
• Some loans include draw periods or construction phases
• Certain programs rely on annual renewals, not single long terms
• Many summaries oversimplify SBA guidance

In summary, SBA loan lengths vary widely by program and structure, with maximum terms determined primarily by use of proceeds, asset type, and SBA program rules rather than borrower preference.

Sources

The information in this article is based on official guidance and program rules published by the U.S. Small Business Administration and is intended to explain general SBA loan term limits and structural requirements.

• U.S. Small Business Administration (SBA). SBA Standard Operating Procedure (SOP) 50 10 8 - Lender and Development Company Loan Programs. Last updated June 2025.
• U.S. Small Business Administration (SBA). SBA Standard Operating Procedure (SOP) 52 00 B - Microloan Program. Last updated June 2018.
• U.S. Small Business Administration (SBA). SBA Standard Operating Procedure (SOP) 50 10, Appendix 13 - 7(a) Manufacturers' Access to Revolving Credit (MARC). Last updated October 2025.

Related Resources

• SBA Loan Interest Rates (updated monthly)
• SBA Loan Eligibility Requirements
• SBA Loan Fees

‍The SBA does not set minimum credit score requirements for SBA loans.‍

Instead, the U.S. Small Business Administration requires SBA-approved lenders to evaluate a borrower’s overall creditworthiness and financial stability using prudent commercial lending standards. Credit score is one factor in that evaluation, but it is not the only factor. Acceptable credit profiles may vary by lender and SBA loan program.

Because lenders retain responsibility for underwriting SBA-backed loans, different lenders may weigh credit history differently based on risk tolerance, loan structure, and the borrower’s broader financial profile.

Quick Summary: SBA loans and credit scores.

• The SBA does not publish minimum credit score cutoffs.
• SBA lenders assess credit as part of a broader financial review.
• Both personal and business credit history may be considered.
• Cash flow, debt obligations, and business stability often matter as much as credit.
• Credit expectations vary by lender and SBA loan program.

Why credit still matters for SBA loans.

SBA loans are partially guaranteed by the federal government, but lenders still carry risk and are responsible for repayment outcomes. As part of standard underwriting, lenders review a borrower’s credit history to better understand financial behavior and repayment reliability.

Credit reports help lenders evaluate factors such as:

• Payment history and consistency
• Existing debt obligations
• Credit utilization and account management
• Patterns that may signal financial stress or stability

A stronger credit profile can help reinforce an application, but weaker credit does not automatically disqualify a borrower if other aspects of the business are strong.

How SBA lenders use credit scores in practice.

While the SBA does not establish minimum credit score requirements, many SBA-approved lenders apply internal credit benchmarks or evaluation standards as part of their standard underwriting process. These benchmarks are set by individual lenders based on risk management policies and are not dictated by the SBA. As a result, acceptable credit profiles may vary from one lender to another.

SBA lenders typically also evaluate credit in context.

That means credit history is reviewed alongside:

• Business cash flow and ability to service debt
• Time in business and operating stability
• Existing liabilities and obligations
• Management experience and ownership structure
• Collateral, when applicable

In some cases, strong cash flow or collateral may help offset a less-established credit profile. In others, credit concerns may prompt a lender to request additional documentation or structure the loan differently.

Does credit evaluation differ by SBA loan program?

While the SBA does not assign credit score requirements to specific loan programs, lenders may apply different underwriting approaches based on the loan type.

For example:

• SBA 7(a) loans are commonly evaluated based on overall repayment ability, including cash flow, credit history, and business fundamentals.
• SBA 504 loans may involve additional scrutiny due to their real estate focus and lien structure.
• SBA Microloans are often administered by nonprofit intermediaries that emphasize business readiness, planning, and local economic impact alongside credit considerations.

These differences reflect lender practices, not SBA-imposed credit thresholds.

What lenders look for beyond credit scores.

Credit is only one piece of an SBA loan application. Lenders often review a combination of financial and operational factors, including:

• Overall credit profile and payment history
• Current cash flow and projected income
• Existing business and personal debt
• Financial statement and tax returns
• Owner equity invested in the business
• Business plan and growth outlook
• Collateral, when required by the program

A well-prepared application that demonstrates financial stability can help lenders feel confident even when credit history is not perfect.

Strengthening your credit profile before applying.

If you’re preparing to apply for an SBA loan, improving your credit profile may strengthen your application. Common preparation steps include:

• Reviewing personal and business credit reports for accuracy
• Addressing outstanding delinquencies or past-due accounts
• Reducing outstanding debt when possible
• Avoiding unnecessary new credit inquiries
• Maintaining consistent, on-time payments over time

These actions support a stronger overall financial picture rather than targeting a specific score.

Can you still qualify with lower or limited credit history?

Some borrowers with limited or imperfect credit histories may still qualify for SBA financing, depending on the lender and program. Lenders may consider additional strengths such as:

• Consistent business cash flow
• Valuable collateral or equity contribution
• Several years of operating history
• Strong management experience
• Clear financial documentation and projections

Because underwriting standards vary, outcomes can differ from lender to lender.

Credit is one part of the SBA loan equation.

When it comes to SBA loans, credit score alone does not determine eligibility. Lenders assess credit as part of a broader review of financial health, business stability, and repayment capacity.

Understanding how lenders evaluate credit—and preparing your full financial profile accordingly—can help you approach the SBA loan process with clearer expectations and stronger readiness.

Sources

• U.S. Small Business Administration (SBA). SBA Standard Operating Procedure (SOP) 50 10 — Lender and Development Company Loan Programs. Version 8. Effective June 2025.
• U.S. Small Business Administration (SBA). SBA Procedural Notice 5000-875701—Sunset of SBSS Score for 7(a) Small Loans. Effective March 1, 2026.

An SBA 7(a) loan is a government-backed small business loan that provides up to $5 million in flexible financing for working capital, equipment, real estate, and business expansion.
The U.S. Small Business Administration (SBA) guarantees a portion of each loan to reduce lender risk, making capital more accessible for qualified businesses. Created under Section 7(a) of the Small Business Act, this program is widely used for growth initiatives, business purchases, and refinancing existing debt.

When to use an SBA 7(a) loan.

SBA 7(a) loans are designed to support a wide range of business needs, especially those that improve long-term financial health or strengthen the business’s ability to grow.

Loan proceeds can be used for working capital, expansion, equipment, real estate, acquisition, or refinancing existing debt under qualifying conditions.

What SBA 7(a) loan funds can be used for.

Working capital and operations

• Operating expenses
• Inventory purchases
• Seasonal cash-flow gaps

Equipment and asset purchases

• Purchasing new or used equipment
• Equipment installation and upgrades
• Buying furniture, fixtures, technology, or supplies

Real estate projects

• Purchasing owner-occupied commercial real estate
• Refinancing existing owner-occupied real estate
• Building a new facility
• Renovating or expanding an existing property

Business acquisition or expansion

• Buying an existing business
• Funding startup costs (in eligible cases)
• Expanding a current business
• Changes of ownership, when structured and SBA-approved
• Multiple-purpose loans, such as partial acquisition and working capital

Refinancing existing business debt

SBA 7(a) loans can consolidate or refinance business debt when the refinancing improves cash flow or meets SBA benefit requirements.

What SBA 7(a) loan funds cannot be used for.

Loan proceeds from SBA 7(a) loans cannot be used for purposes that do not benefit the business directly, or do not meet the SBA’s lending standards. Ineligible uses include:

• Paying off or refinancing an existing SBA loan
• Buying out a partner, unless part of SBA-approved ownership change structure
• Paying delinquent federal or state withholding taxes
• Payments or distributions to business owners that do not serve a business purpose
• Any purpose that the SBA deems not sound, speculative, or primarily personal

Eligibility requirements for SBA 7(a) loans.

Most U.S. small businesses can qualify for an SBA 7(a) loan if they meet SBA standards for location, business purpose, size, and creditworthiness. The SBA sets nationwide rules for who is eligible, while individual lenders may have additional requirements. Your business must meet all of the following SBA criteria to be eligible.

1. Business type and status

• Must be a for-profit business
• Must be actively operating
• Must operate within the United States or U.S. territories‍
• Must be in an eligible industry

2. Business size standards

Must meet the SBA’s definition of a small business. The SBA defines a small business based on industry-specific size standards that consider factors like annual revenue and number of employees.

3. Ability to repay

• Must demonstrate sufficient cash flow to support loan payments
• Personal credit history and business financials must show responsible borrowing behavior

4. Equity and owner participation

• 100% of direct and indirect owners and guarantors must be U.S. citizens, U.S. nationals, or lawful permanent residents ("green card" holders)
• The business must show reasonable owner equity investment
• Owners with over 20% ownership must provide:
  • Unlimited personal guarantee
  • Financial disclosures

5. Use of proceeds

• SBA loan proceeds must be used for sound business purposes
• Must not be used for ineligible or personal purposes (see When to Use an SBA 7(a) loan)

6. Exhaustion of other financing options

Borrowers must demonstrate that they are unable to obtain credit elsewhere on reasonable terms.

Ineligible businesses.

Certain business types cannot qualify for SBA loans, including:

• Nonprofit organizations
• Financial businesses primarily engaged in lending
• Real estate investment firms not occupying property
• Businesses engaged in illegal activities
• Pyramid sale distribution plans
• Certain restricted membership organizations, such as private clubs
• Speculative or investment-based ventures

Common disqualifiers for SBA 7(a) loans.

A borrower may be ineligible for a 7(a) loan if:

• The business or owner has delinquent federal debt
• The owner has recent criminal activity (the SBA evaluates case-by-case)
• The business cannot demonstrate ability to repay
• Loan proceeds would be used for ineligible purposes
• Insufficient equity injection for acquisition or startup funding
• Some or all of the owners or guarantors are not U.S. citizens, U.S. nationals, or lawful permanent residents

Lender-driven requirements for SBA 7(a) loans.

In addition to the SBA program rules, lenders typically layer on additional requirements:

• Minimum personal credit score (often 640-680+)
• Minimum time in business (often 2+ years, but this can vary)
• Minimum revenue thresholds
• Collateral requirements for loans over a certain size
• Bank statement health, including consistent cash flow

These requirements are not SBA rules, but instead are lender underwriting standards.

Learn more about SBA loan eligibility

For a deeper breakdown, including full disqualifier lists, industry restrictions, and eligible use of proceeds, read our complete guide to SBA loan eligibility requirements.

Types of SBA 7(a) loans.

The SBA offers several loan programs under the 7(a) umbrella, each designed to serve different business needs. These factors include loan size, speed of funding, working capital structure, or international trade.

When choosing a 7(a) loan type, consider:

• How much funding you need
• How quickly you need the funds
• Whether you need a term loan, or line of credit
• Your intended use of the loan proceeds

Below is an overview of the primary SBA 7(a) loan types, followed by a explanations of each.

Standard SBA 7(a) loan

The standard 7(a) loan is the SBA’s most common and flexible loan option.

Best used for:

• Working capital
• Equipment and supplies
• Owner-occupied real estate
• Business expansion or acquisition

Key features:

• Loan amounts from $350,000 to $5 million
• SBA guarantees 85% of loans up to $150,000 and 75% for larger loans
• Collateral is required
• SBA provides final approval before issuing a loan number

7(a) small loan

The 7(a) small loan is designed for businesses that need a smaller amount of financing, but want the benefits of SBA backing.

Key features:

• Maximum loan amount: $350,000
• Same guarantee structure as Standard 7(a) loans
• No collateral required for loans under $50,000
• Faster processing compared to larger SBA loans

SBA Express loan

The SBA Express loan prioritizes speed and convenience, with much faster approval and processing times than traditional 7(a) loans.

Best used for:

• Businesses that need faster access to capital

Key features:

• Maximum loan amount: $500,000
• SBA guarantee: 50%
• Lenders make eligibility, credit, and collateral decisions under delegated authority from the SBA
• Response time of 36 hours or less

Export-focused SBA 7(a) loans

The SBA offers three specialized 7(a) programs to support businesses involved in international trade.

Export Express loan

A streamlined option for businesses entering or expanding export operations.

Key features:

• Maximum loan amount: $500,000
• SBA guarantee:
  
  • 90% for loans up to $350,000
  • 75% for larger loans
• Can be structured as a term loan or revolving line of credit
• Lines of credit may last up to 7 years
• 24-36 hour response time

Export Working Capital Program (EWCP)

Designed to fund working capital directly tied to export sales.

Key features:

• Loan amounts up to $5 million
• SBA guarantee: 90%
• Working capital terms up to 10 years
• Equipment financing up to the useful life of the asset (max 15 years)
• Real estate terms up to 25 years

International Trade loan

Built for businesses that need to expand exports or modernize operations to compete internationally.

Key features:

• Loan amounts up to $5 million
• SBA guarantee: 90%
• Working capital terms up to 10 years
• Equipment financing up to the useful life of the asset (max 15 years)
• Real estate terms up to 25 years

SBA CAPLines

CAPLines are SBA-backed revolving lines of credit designed for businesses with cyclical or short-term working capital needs.

General features:

• Loan maximums and guarantees align with Standard 7(a) loans
• Structured as lines of credit rather than lump-sum loans

Types of CAPLines

Working Capital CAPLine

For businesses with accounts receivable and/or inventory that needs asset-based financing.

Contract CAPLine

For businesses performing work under contracts, covering costs tied to specific projects.

Builders CAPLine

For construction contractors and builders financing residential or commercial projects.

Seasonal CAPLine

For businesses with predictable seasonal revenue cycles. These businesses must demonstrate prior seasonal patterns to qualify.

7(a) Working Capital Pilot (WCP) program

The WCP program offers monitored, asset-based lines of credit for certain industries.

Key Features:

• Loan amounts up to $5 million
• Available to businesses in manufacturing, wholesale, and professional services
• Requires at least one year of operating history
• Requires detailed financial reporting, including inventory and receivables
• SBA guarantee aligns with standard 7(a) loans

SBA 7(a) loan rates, fees, and repayment terms.

SBA 7(a) loans are structured to support long-term small business growth, with interest rates, fees, and repayment terms designed to balance affordability with lender risk. While the SBA sets maximum limits, the final loan terms are determined by the lender based on borrower qualifications and loan structure.

SBA 7(a) loan interest rates

SBA 7(a) loan interest rates are set by the lender, not the SBA. Rates are based on factors such as:

• Creditworthiness
• Loan amount
• Repayment term
• Business financial strength

Borrowers may accept, reject, or sometimes negotiate the offered rate with the lender.

How SBA 7(a) interest rates are calculated

Most SBA 7(a) loans use a prime-based interest rate, which may be fixed or variable.

Interest rate formula:

Prime Rate + Lender Markup (capped by the SBA)

As of January 5, 2026, the prime rate is 6.75%. The SBA allows lenders to add a markup, but caps how high the total interest rate can be, depending on loan size and repayment term.

Want current SBA rate caps?

For exact SBA 7(a) rate ranges, monthly caps, and a full explanation of how your rate is calculated, see our guide to SBA loan interest rates.

SBA 7(a) guarantee fees

In addition to interest, SBA 7(a) loans require a one-time SBA guarantee fee. This fee helps offset the cost of the SBA’s loan guarantee and is typically financed into the loan.

How guarantee fees work

• Fee amount depends on loan size and 7(a) loan type
• For FY 2025, guarantee fees typically range from 2%-3.5%
• Fees are assessed only on the guaranteed portion of the loan

See full guarantee fee tables

For a complete breakdown of SBA 7(a) guarantee fees by loan size and year, read our guide to SBA guarantee fees.

Other SBA 7(a) loan fees (and what fees are prohibited)

One of the advantages of SBA loans is fee transparency.

Fees the SBA prohibits

The SBA expressly prohibits lenders from charging most common loan fees, including:

• Application fees
• Origination fees
• Processing fees
• Renewal fees
• Brokerage fees

Permitted lender fee

Lenders may charge a flat fee of up to $2,500 per loan, regardless of loan size.

Estimate your SBA 7(a) loan payments

Curious what your monthly payment might look like for an SBA loan?

Use our SBA loan calculator to estimate payments, based on your loan amount, rate, term, and fees.

SBA 7(a) loan repayment terms (maturity)

SBA loans are designed for long-term repayment, with maturity periods tied to the loan’s purpose and the useful life of the assets financed.

‍Loan maturity refers to the total time a borrower has to repay the loan. The final payment is made at the end of the maturity term.

Asset life rule

When SBA 7(a) loans are used to purchase fixed assets, such as real estate, equipment, or commercial property, the loan maturity is limited to the economic life of the asset. This can not exceed 25 years.

Fixed assets are long-term assets that:

• Are not easily converted to cash
• Are intended for ongoing business use
• Include real estate, machinery, and furniture

How SBA 7(a) loans work.

SBA 7(a) loans follow a structured approval process designed to ensure borrowers meet eligibility requirements, and lenders are protected by the SBA’s guarantee. While lenders handle most of the underwriting, the SBA plays a key role in approving and backing the loan.

Below is a step-by-step overview of how the SBA 7(a) loan process works.

Step 1: Define your loan purpose and funding needs

Before applying, you must clearly identify:

• How much funding you need
• How you will use loan proceeds
• Whether the use of funds meet SBA eligibility requirements

Your proposed loan purpose impacts:

• Loan type
• Repayment term
• Collateral requirements
• SBA approval criteria

Step 2: Confirm your eligibility

Next, you must meet SBA eligibility requirements related to:

• Business type and size
• Location and ownership
• Ability to repay
• Access to other financing

Lenders typically conduct an initial eligibility review before moving forward.

Step 3: Choose the right SBA 7(a) loan type

Based on funding needs and timing, you’ll select the most appropriate 7(a) loan type:

• Standard 7(a)
• 7(a) small loan
• SBA express
• Export-focused 7(a) loan
• CAPLine

The loan type determines:

• Maximum loan amount
• SBA guarantee percentage
• Approval speed

Step 4: Gather required documents

SBA loans require detailed financial documentation, which may include:

• Business and personal tax returns
• Financial statements
• Business debt schedule
• Business plan, or use of funds explanation
• Ownership and management details

Having documents prepared in advance can significantly reduce approval time.

Step 5: Apply with an SBA-approved lender

Borrowers apply directly through an SBA-approved lender, not with the SBA itself.

The lender:

• Reviews creditworthiness
• Structures the loan
• Determines collateral requirements
• Submits the loan to the SBA (or approves under delegated authority where applicable)

Step 6: Lender underwriting and SBA review

Depending on the loan type:

• Standard 7(a): SBA provides final approval
• Express/delegated loans: Lender makes approval decision

The SBA then assigns a loan authorization number, which enables funding.

Step 7: Loan closing, funding, and repayment

Once approved:

• Loan documents are finalized
• Funds are disbursed
• Repayment begins according to the agreed term

Borrowers must maintain compliance with loan agreements throughout the repayment period.

How to apply for an SBA 7(a) loan.

To apply:

1. Choose an SBA-approved lender
2. Prepare financial and business documentation
3. Submit an application for review
4. Respond to underwriting questions
5. Complete loan closing

Timelines vary, but approvals can take several weeks for standard loans, and as little as a few days for SBA Express loans.

Applying for an SBA loan

Interested in applying for an SBA loan? Read our complete guide to the SBA loan application process.

Bottom line: Is an SBA 7(a) loan right for your business?

An SBA 7(a) loan is one of the most flexible and widely used financing options available to small businesses, offering government-backed funding for working capital, equipment, real estate, expansion, and debt refinancing. With long repayment terms, capped interest rates, and broad eligibility, 7(a) loans are designed to support sustainable business growth rather than short-term cash needs.

While SBA loans require more documentation and a longer approval process than many alternative financing options, they often provide lower costs and longer maturities in exchange. For businesses that can meet eligibility requirements and prepare the necessary paperwork, and SBA 7(a) loan can be a powerful tool for long-term stability and expansion.

Key takeaways:

• SBA 7(a) loans offer up to $5 million in flexible, government-backed financing
• Funds can be used for working capital, equipment, real estate, acquisitions, and refinancing
• Interest rates are prime-based with SBA-imposed caps
• Repayment terms extend up to 25 years, depending on loan purpose
• Approval timelines vary by loan type, with Express options available for faster funding‍
• Strong preparation and documentation significantly improve approval odds

Related resources

Learn more about SBA loans:

• SBA Loan Eligibility Requirements
  
• SBA Loan Interest Rates Explained
  
• SBA Guarantee Fees Guide

Compare SBA financing options:

• SBA 7(a) vs SBA 504 Loans

Estimate your 7(a) loan costs:

• SBA loan calculator

SBA 504 and SBA 7(a) loans are designed for different business needs. Choosing between them depends primarily on how the funds will be used, the type of asset being financed, and whether flexibility or long-term structure is the priority.

This guide compares SBA 504 and SBA 7(a) loans through a decision-focused lens, highlighting the practical differences that help determine which program aligns with a specific project or business goal.

SBA 504 vs SBA 7(a): Key differences at a glance.

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How to decide between SBA 504 and SBA 7(a) loan programs.

• If your primary goal is purchasing, constructing, or renovating owner-occupied commercial real estate, then SBA 504 financing is commonly used for asset-based projects tied to a specific location.
• If your financing needs include working capital, inventory, or multiple business purposes, then SBA 7(a) loans are often considered due to their broader flexibility.
• If your project centers on long-term fixed assets like property, equipment or machinery, and predictable repayment is a priority, then SBA 504 may align better with that structure.
• If your business needs financing that can support both real estate and operational expenses under one loan, then SBA 7(a) is typically structured to allow that flexibility.‍
• If the project does not involve long-term assets or real estate, then neither SBA 504 nor SBA 7(a) may be the most efficient option.

These scenarios focus on common uses of each SBA program. Final eligibility, terms, and approval depend on SBA rules and lender-specific criteria.

What this comparison does not cover.

While this comparison is intended to help explain structural and use-of-funds differences between the SBA 504 and SBA 7(a) loans, it does not:

• Determine whether your business qualifies for either program
• Predict approval likelihood or loan terms
• Establish credit score, revenue, or collateral requirements
• Compare interest rates, fees, or total borrowing costs
• Replace lender or SBA underwriting review

Final eligibility and loan approval depend on SBA program rules, lender underwriting standards, and project-specific factors that are evaluated outside of this comparison.

Eligibility considerations.

Both SBA 504 and SBA 7(a) loans follow SBA-wide eligibility standards, with additional program-specific requirements based on how the funds are used and how the project is structured.

This comparison does not determine eligibility. A full explanation of SBA eligibility rules, including ownership requirements, disqualifying factors, and lender overlays, is covered in our complete SBA loan requirements guide.

SBA Loan Requirements and Eligibility Guide

Next steps to explore.

Based on how SBA 504 and SBA 7(a) loans differ, the following resources provide deeper detail on each option and the requirements involved:

Learn more about SBA 504 loans.

Covers how the program works, eligible uses of funds, project structure, and typical use cases.

https://www.lendio.com/blog/sba-504-loans/

Learn more about SBA 7(a) loans

Explains flexible uses of funds, loan structures, and scenarios where SBA 7(a) financing is commonly used.

https://www.lendio.com/blog/sba-7a-loan/

Review SBA loan eligibility requirements.

Provides a complete breakdown of SBA-wide eligibility rules and common disqualifiers.

https://www.lendio.com/blog/sba-loan-requirements/

Summary: SBA 504 vs SBA 7(a).

SBA 504 and SBA 7(a) loans are designed to support different types of business financing needs. SBA 504 loans are typically used for long-term, asset-based projects such as owner-occupied commercial real estate, while SBA 7(a) loans offer broader flexibility for a wider range of business purposes.

Key Takeaways

• SBA 504 loans are commonly used for fixed-asset investments tied to a specific location and long-term expansion projects.
• SBA 7(a) loans are generally more flexible and can support working capital, acquisitions, and mixed-use financing needs.
• When real estate is financed under either program, owner-occupancy requirements apply under SBA rules.
• Eligibility, loan terms, and approval outcomes depend on SBA guidelines and lender-specific underwriting, not program type alone.

An SBA 504 loan is a government-backed financing program designed to help small businesses purchase or improve owner-occupied commercial real estate and long-term equipment through a fixed-rate, long-term structure.

The program is administered by the U.S. Small Business Administration (SBA) and funded through a partnership between a traditional lender, a Certified Development Company (CDC), and the borrower. SBA 504 loans are specifically intended to support long-term business growth, job creation, and local economic development. They’re most ideal for small businesses in the growth stage, looking to expand operations long-term.

When to use an SBA 504 loan.

SBA 504 loans exist to make large, long-term investments more affordable for qualifying small businesses, particularly when purchasing real estate or high-cost equipment that will be used for many years.

In many cases, these loans are used when a small business:

• Wants predictable monthly payments through fixed interest rates
• Is planning a long-term expansion, not a short-term cash flow need
• Needs financing for assets that are central to operations, such as buildings or machinery

What SBA 504 loans can be used for.

SBA 504 loans are designed for specific, asset-based purposes. According to SBA 504 program guidelines, funds may be used for:

Real estate acquisition and development

• Purchasing owner-occupied commercial real estate
• Purchasing one or more existing buildings
• Construction new commercial buildings
• Expanding, converting, or renovating existing facilities
• Acquiring land as part of an eligible project (not for speculation or future resale)

Site improvements

• Grading and preparing land
• Streets, access roads, and parking lots
• Landscaping and drainage
• Certain community improvements (such as curbs or sidewalks), generally limited to a small portion of total project costs
• Energy-efficient or renewable energy improvements or equipment, when these improvements support the project facility, can be documented through an independent audit or report, and are not intended for energy resale.

Long-term equipment and fixed assets

• Purchasing and installing fixed equipment with a useful life of at least 10 years
• Equipment must generally be:
  
  • Permanently installed or affixed
  • Used at a specific, fixed location
• In some cases, short-term financing for equipment, furniture, or furnishings may be permitted only if:
  
  • The items are essential to the project
  • They represent a minor portion of the total project cost

Project-related soft costs (Limited)

SBA 504 loan proceeds may include certain professional or administrative costs when they are:

• Directly attributable to the eligible project
• Necessary to complete the transaction

Examples may include appraisals, surveys, and title- related costs, or zoning/ permitting expenses.

Interim or Bridge financing (Limited)

SBA 504 loans may be used to repay short-term bridge or interim financing (typically three years or less), when that financing was used to cover eligible project costs prior to permanent funding through the 504 program.

What SBA 504 loans cannot be used for.

Because SBA 504 loans are intended to support long-term capital investment, they come with strict limitations on how borrowers can use the proceeds. These restrictions are especially important in distinguishing SBA 504 loans from more flexible SBA loan programs.

Here’s what SBA 504 loans cannot be used for:

Working capital and operating expenses

• Day-to-day operating expenses
• Payroll, rent, utilities, or marketing costs
• Inventory, supplies, or raw materials
• Short-term cash flow needs

Debt refinancing (with some exceptions)

• Refinancing existing business debt not tied to eligible fixed assets
• Refinancing for the purpose of freeing up working capital
• Revolving or short-term debt structures

Investment or passive real estate

• Rental or investment properties
• Property not primarily occupied by the operating business
• Speculative real estate purchases

Intangible assets

• Business goodwill
• Software or cloud-based services
• Intellectual property

Land speculation or excess land

• Purchasing vacant land for future development
• Acquiring land in excess of current operational needs
• Land intended for resale or lease to third parties

Ownership interests (with some exceptions)

• Purchasing stock or ownership interests unless the transaction is structured to acquire eligible real estate or fixed assets
• Any portion of a transaction that is attributed to goodwill or excess value must be financed separately

Clarifying SBA 504 vs. SBA 7(a) uses of proceeds.

Many SBA rules around use of funds vary by program. SBA 504 loans do not allow working capital, inventory purchases, or operating expense financing, even though these uses are often permitted under SBA 7(a) loans.

This distinction matters because:

• SBA 504 loans are asset-focused and fixed-structure by design
• SBA 7(a) loans are more flexible and can support broader business needs

While you can use SBA 7(a) loans for several allowed uses for SBA 504 funds, the reverse isn’t usually true. Understanding this boundary helps ensure you pursue the right SBA program based on the purpose of financing, not just loan size or rate.

Learn more about SBA 504 loans vs. SBA 7(a) loans.

The SBA 504 program is structured to promote:

• Long-term business stability
• Job creation
• Owner-occupied property ownership
• Capital investments with lasting economic impact

Because of this mission, SBA 504 loans are intentionally not designed for short-term liquidity or operational flexibility. If your business is seeking flexible capital for day-to-day needs, you might want to consider alternative SBA programs or non-SBA financing options.

SBA 504 loan eligibility: High-level requirements.

SBA 504 loans are designed for established small businesses making long-term, asset-based investments. While exact approval criteria will also vary by lender and Certified Development Companies (CDCs), the SBA has several program-specific requirements that borrowers must meet.

This section outlines the eligibility considerations unique to SBA 504 loans, not the full SBA program eligibility criteria.

Program-specific eligibility criteria for SBA 504 loans.

Owner-occupancy requirement

SBA 504 loans are limited to owner-occupied properties.

• For existing buildings, the operating business must generally occupy at least 51% of the property.
• For new construction, required owner occupancy is typically 60%, with the expectation that owners will occupy 80% within 10 years.

This requirement ensures 504 financing supports active business operations rather than passive real estate investment.

Eligible project type

SBA 504 loans are reserved for long-term, fixed-asset projects, such as:

• Purchasing or constructing owner-occupied commercial real estate
• Expanding or renovating existing facilities
• Acquiring fixed equipment with a long useful life

Projects focused on working capital, short-term expenses, or speculative investment do not meet SBA program requirements.

Business stage and stability

SBA 504 loans are most commonly used by growth-stage businesses that:

• Have established operations
• Are planning long-term expansion
• Can support extended repayment terms

While newer businesses are not automatically excluded, additional equity or documentation may be required depending on project structure and lender review.

Financial review and repayment ability

Rather than relying on a single qualification metric, SBA 504 loans are typically evaluated using a holistic financial review, which commonly considers:

• Business financial performance and cash flow trends
• Personal and business credit history
• The long-term viability of the project being financed

Exact requirements vary by lender and CDC.

Eligibility rules that apply to all SBA loans.

In addition to the program-specific considerations above, SBA 504 borrowers must also meet the SBA’s general eligibility requirements, which address factors such ass:

• Business type and lawful operation
• Ownership and guarantor standards
• Use of loan proceeds
• Ability to obtain credit elsewhere on reasonable terms

Because these rules apply across multiple SBA programs, they are covered in detail in our comprehensive guide to SBA loan eligibility requirements.

When an SBA 504 loan may not be a fit.

An SBA 504 loan may not be appropriate if a business:

• Needs working capital or flexible funding
• Plans to purchase investment or rental property
• Does not meet owner-occupancy requirements
• Is seeking short-term or revolving credit

In these cases, other SBA loan programs or financing options may better align with the business’ needs.

SBA 504 economic development eligibility requirements (program-level).

In addition to standard SBA eligibility rules, all SBA 504 projects must meet at least one SBA-defined economic development objective. These requirements are specific to the 504 program and are evaluated at the project level, typically by the Certified Development Company (CDC), rather than solely by the borrower. 

This section explains how SBA 504 projects satisfy those program requirements at a high level.

Economic Development Objectives for SBA 504 projects.

Under SBA regulations, a 504 project must achieve at least one of the following economic development objectives to be eligible.

Job creation or job retention

Most SBA 504 loans qualify by demonstrating job creation or job retention.

• Projects must generally support the creation or retention of at least one job opportunity per $90,000 of SBA-backed debenture.
• For small manufacturers and energy-related projects, the threshold is higher.
• Job retention may be used when a CDC can reasonably demonstrate that jobs would be lost if the project were not completed

Job opportunities do not need to be located directly at the project facility, however the majority of jobs must typically benefit the local community where the project is located.

Alternative Economic Development or Public Policy goals

If a project does not meet job creation or retention benchmarks, it may still qualify by advancing other SBA-approved public policy or community development goals. 

Examples include projects that support:

• Community development initiatives
• Rural development
• Business district revitalization
• Expansion in underserved or special geographic areas
• Certain energy efficiency or sustainability objectives

Energy Public Policy projects (special category)

Some SBA 504 projects qualify under energy-related public policy goals, which follow additional SBA guidance.

At a high level, eligible energy public policy projects may include those that:

• Reduce existing energy consumption by at least 10%
• Generate more than 15% of the energy used at the project facility from renewable resources
• Incorporate sustainable design elements that reduce environmental impact

These projects must be supported by third-party documentation, such as an energy audit or engineering report, verifying projected energy usage and savings.

Because these requirements are technical and project-specific, they are typically evaluated and documented by the CDC during the application process.

How Economic Development requirements affect borrowers.

For most borrowers, economic development eligibility is handled primarily by the CDC, not the business owner, but it’s helpful to know what the CDC will be looking for.

Borrowers will generally be responsible for:

• Providing project details
• Sharing employment estimates or operational impact
• Supporting documentation requested during underwriting

The CDC will use this information to ensure the project aligns with SBA economic development objectives and complies with program requirements.

How SBA 504 loans work (Step-by-Step).

SBA 504 loans follow a structured process because they involve multiple parties. These include a traditional lender, a Certified Development Company (CDC), and the SBA. Exact timelines and requirements vary by lender and project type, but the process generally looks like this.

Step 1: Confirm your project is eligible.

Start by confirming your planned purchase or improvement fits SBA 504 guidelines. This is most commonly owner-occupied commercial real estate or long-term fixed equipment. The SBA 504 program is not intended for working capital, inventory, or investment property.

Step 2: Estimate your total project cost and financing structure.

Next, outline your full project budget (purchase price, construction costs, renovations, equipment, eligible soft costs). SBA 504 projects are financed through a shared structure between the lender and CDC, plus a borrower contribution.

Step 3: Choose a Certified Development Company (CDC).

SBA 504 loans are typically originated through a participating bank or lender and a CDC, which supports the SBA-backed portion of the financing. The CDC also helps document project eligibility and economic development objectives. You can find a CDC in your state via the SBA’s list of certified development companies, and they will typically discuss your project with you and help you find a participating bank or lender. You can also use the SBA’s Lender Match tool to find SBA-approved lenders participating in the 504 program.

Here is a guide to typical 504 financing structures based on business type or project purpose.

Step 4: Prepare your application package and documentation.

You’ll typically provide business and project documentation used for underwriting and SBA program review, such as:

• Business financial statements and tax returns
• A current debt schedule
• Information about owners and guarantors
• Project details (property, equipment specs, construction plans, budgets)

Exact documentation requirements will vary by lender, CDC, and transaction complexity. You can visit the SBA's 504 Authorization File Library to find the documents you will need for your loan package.

Step 5: Underwriting and eligibility review.

The lender and CDC will evaluate your application package to confirm:

• The business and project meet SBA 504 requirements
• Repayment ability and overall creditworthiness
• Project structure and collateral considerations
• Required program elements (such as owner occupancy and economic development objectives)

Step 6: SBA authorization and loan approval.

After underwriting, the CDC submits the required documentation for SBA authorization. Once approved, the financing moves towards closing.

Step 7: Close the loan and disburse funds.

At closing, the project is funded according to the approved structure. For construction or renovation projects, funds may be disbursed in phases based on project milestones.

Step 8: Begin repayment and meet ongoing reporting requirements.

After disbursement, repayment begins under the agreed term and structure. For SBA 504 loans, CDCs may also track program-related outcomes (such as job impacts) as part of SBA reporting requirements.

Pros and Cons of SBA 504 Loans.

SBA 504 loans offer meaningful advantages for certain long-term business projects, but they also come with limitations. Understanding both sides can help businesses determine whether this program aligns with their financing goals.

Pros of SBA 504 loans

• Designed for long-term asset purchases - 504 loans are specifically structured to support major investments, making them ideal for expansion projects with lasting value.
• Fixed interest rates - The SBA-backed portion of the loan is commonly offered at a fixed rate, which helps provide predictable monthly payments over the life of the loan.
• Long repayment terms - Depending on the asset being financed, SBA 504 loans feature extended repayment periods, commonly from 10-25 years, which can help spread costs over time for large purchases.
• Lower down payment requirements- In many cases, 504 loans require less upfront equity compared to traditional commercial real estate financing, although specific contributions will vary by project and borrower.
• Supports economic development goals - The program is designed to encourage job creation, community growth, and long-term business investment.

Cons of SBA 504 loans

• Limited use of proceeds- SBA 504 loans cannot be used for working capital, inventory, or most short-term business expenses.
• More complex loan structure - Because SBA 504 loans involve multiple parties, including a traditional lender and a CDC, the process can be more involved than single-lender loans.
• Longer approval timelines - Layered review and authorization processes often result in longer timeframes compared to non-SBA or conventional financing options.
• Owner-occupancy requirements - Only owner-occupied properties qualify, which excludes investment or rental real estate projects.
• Not ideal for early-stage or short-term needs - Businesses seeking quick access to capital or flexible funding may need to explore other loan programs.

How to decide whether an SBA 504 loan fits your project.

• If your business is purchasing or constructing owner-occupied commercial real estate, then an SBA 504 loan is commonly used to finance long-term property investments tied directly to business operations.
• If your business is expanding, converting, or renovating an existing facility it actively operates from, then SBA 504 financing may be relevant for the fixed-asset portion of that project.
• If your business is purchasing long-term, fixed equipment that will be installed at a specific location and used over many years, then an SBA 504 loan may help finance those assets.
• If your project involves energy-efficiency upgrades or on-site renewable energy improvements that can be documented through an energy audit or engineering report, then the project may qualify under SBA 504 energy public policy goals.
• If your business is planning a large, long-term investment and prefers predictable payments through fixed interest rates, then SBA 504 financing may align with that goal.
• If your business needs working capital, inventory funding, or short-term operational support, then an SBA 504 loan is typically not a fit, since the program is designed for fixed assets rather than flexible business expenses.
• If your project involves investment or rental property that will not be primarily occupied by your operating business, then SBA 504 financing is generally not appropriate.

Bottom line: is an SBA 504 loan right for your business?

SBA 504 loans are a specialized financing program designed to support long-term, fixed-asset investments such as owner-occupied commercial real estate and permanent equipment. By combining a traditional lender, a Certified Development Company (CDC), and SBA-backed financing, the program helps eligible small businesses fund large projects tied to expansion, job creation, and economic development.

Because SBA 504 loans are purpose-built for asset-based growth, they are best evaluated based on project type, business stage, and long-term operational goals, rather than short-term funding needs.

Key Takeaways.

• SBA 504 loans are designed for fixed assets, not working capital. They are commonly used for owner-occupied real estate, construction, renovations, and long-term equipment.
  
• Eligibility is project-driven, meaning both the business and the proposed project must meet SBA program guidelines, including owner-occupancy and economic development objectives.
  
• The loan structure is unique, involving a lender, a CDC, and SBA-backed financing, which can provide long repayment terms and predictable payments for qualifying projects.
  
• SBA 504 loans differ from SBA 7(a) loans, particularly in use of proceeds, flexibility, and structure. Choosing the right program depends on how the funds will be used.
  
• SBA 504 financing is typically best suited for growth-stage businesses planning long-term investments, rather than early-stage companies or businesses seeking short-term or flexible capital.

Businesses considering SBA financing often compare multiple loan programs before moving forward. Understanding how each option works—and when it applies—can help ensure the chosen financing aligns with long-term business goals.

Related resources.

Learn more about SBA loans:

• SBA Loan Eligibility Requirements
  
• SBA Loan Interest Rates Explained
  
• SBA Guarantee Fees Guide

Compare SBA financing options:

• SBA 7(a) vs SBA 504 Loans

SBA loans are a flexible, affordable funding option for small businesses, but they often take weeks or months to process. This is largely due to an extensive application process, strict requirements, and a high demand for these loans.

While you’re waiting for more permanent funding to come through, you might want to consider a business bridge loan. These are a fast, temporary solution that keeps business plans moving during the wait.

What is a bridge loan?

A business bridge loan is a short-term funding solution designed to help fill the gap while you wait for long-term, reliable financing to arrive. These loans provide more immediate cash flow for urgent expenses, like rent, payroll, or commercial real estate.

The trade-off for quick funding is that they typically come with high interest rates and shorter repayment terms—often no more than a year. This makes them better as a temporary solution, as opposed to SBA loans, which usually have more favorable terms and rates.

Taking out a bridge loan doesn’t necessarily disqualify you from SBA funding. However, government-backed loan programs often look at your overall financial situation when deciding whether to approve your application. This includes your debt-to-income (DTI) and debt-service coverage ratio (DSCR)—which indicates your ability to repay.

Before applying for a short-term business financing solution, make sure it won’t prevent you from securing a more permanent financing solution like an SBA 7(a) or 504 loan.

Why businesses use bridge financing.

Businesses use bridge loans—sometimes called gap financing—to handle short-term or pressing cash flow needs. They’re a stopgap until a long-term solution, like an SBA loan, comes through.

Bridge loans can help by:

• Covering payroll or operating expenses while waiting for SBA loan approval
• Purchasing inventory or equipment tied to time-sensitive opportunities
• Locking in contracts before SBA funds are ready
• Purchasing or constructing commercial property
• Providing working capital in the midst of a major deal or sale (like an acquisition)

How a bridge loan helps while SBA funds are pending.

SBA loans exist to help small businesses get the funding they need to launch, grow, and thrive. Over the past handful of years, the SBA has provided loans (and grants) to 13 million small businesses.

But SBA loans can take time to process—sometimes around 90 days—and you might not be able to wait. While your application is pending, a business bridge loan can help with:

• Fast approvals and quick funding (often same-day or next-day funding)
• Flexible repayment structures (depending on lender)
• Ability to preserve momentum instead of pausing commercial operations
• Funds to secure an immediate opportunity

Key differences between bridge loans and SBA loans.

Business bridge loans and SBA loans are both designed to help fund your business, but here's how they differ:

• Unlike SBA loans, bridge loans are a short-term business financing solution
• Bridge loans are usually more expensive, with higher interest rates and other lender fees
• SBA loan approval can take weeks or months, whereas bridge loans may be funded within a week or less
• Bridge loans often have short repayment timelines of about a year (up to three years when used for real estate) vs. longer SBA terms (10 to 25 years)
• Bridge loans don’t come with a federal guarantee, so lenders assess risk differently (and may charge more)

Know that both bridge loans and SBA loans can be used for an array of business needs, including:

• Short-term working capital (and long-term for SBA loans)
• Financing equipment, inventory, machinery, etc.
• Purchasing property

Bridge loans may be either secured or unsecured. Some lenders require collateral—like property in the case of real estate acquisitions—in exchange for funds. SBA loan programs vary, but loans above $50,000 may require collateral or a personal guaranty.

What lenders look for in bridge loan applicants.

With any form of business financing, lenders want to know you can repay the amount borrowed on schedule. Requirements vary, but here’s what lenders typically look for in an applicant:

• Strong cash flow and the ability to repay quickly
• Clear evidence that an SBA loan is already in progress (especially if you’re planning on using the SBA loan to refinance current business debts)
• Clear financial documentation and up-to-date bank statements
• Good or excellent credit (aim for 740+)
• DSCR of at least 1.25 or DTI below 50%
• Sufficient collateral (like real estate or other assets)

If you’re using the bridge loan for real estate, lenders will also generally review the loan-to-value ratio (LTV). Most lenders only let you borrow up to 80% of the property’s value.

When a bridge loan makes sense.

A bridge loan might make sense for your business if:

• You have a time-sensitive opportunity (like a great real estate deal)
• You need to stabilize cash flow during the waiting period
• You’re confident the SBA loan approval is on track
• You’re sure of your ability to repay the loan in a short period (or else have the means to refinance it)
• The benefits of the loan outweigh the costs
• You have the required collateral

Note: If your business needs help recovering from a declared disaster, an SBA disaster loan may help.

Bridge loans: A possible short-term solution.

Bridge loans help small business owners move forward instead of waiting on lengthy SBA timelines. But they aren’t without risk. As a form of short-term business financing, they generally must be repaid within a few months or years. They also tend to come with higher interest rates and other fees that SBA loans don’t have.

Before choosing a bridge loan, weigh the benefits—like more immediate funds—against the costs. It helps to have a clear plan and exit strategy so you can make the most out of the loan while safeguarding yourself (and your business) against future complications.

Thinking about your business financing options? Check out Lendio’s marketplace today.

Restaurants operate on thin margins, requiring many sales to generate healthy profits. They also have higher startup costs than some other industries, and it’s not uncommon to need funds both early on in the business, as well as later on.

While SBA funding is a common choice, it’s not the only game in town. In fact, some restaurants need the flexibility, speed, and approval odds that are available through other options. Learn about the most common restaurant funding options available, as well as how to know which is right for you.

Where SBA loans fit into restaurant financing.

The Small Business Administration (SBA) is often the first option restaurant owners think of when looking for long-term financing. The SBA 7(a) and 504 loans can offer up to $5 million and have lower rates than other types of funding. Because SBA funds can be used for equipment costs and payroll, they may seem like a natural fit for the challenges restaurants face in any economy.

However, getting approved for an SBA loan can be a long process, with slower approval times and rigorous documentation requirements. The large collateral terms may make them out of reach for new or small eateries.

Even if the SBA loan is the ideal pick, the timeline may force restaurants to look elsewhere to cover them while the loan is being approved. If a fryer breaks, for example, it’s not reasonable to replace it in 30 to 60 days, which is how long a traditional SBA loan can take from application to loan disbursement.  

Restaurants must keep their doors open and welcome new customers, so they’ll need the money faster than this. That’s why it’s good to know the other loan types available to owners with urgent cash needs or who want to take advantage of a quick-turn growth opportunity.

Traditional bank loans.

Starting a restaurant is a big undertaking, but if the owner already has a relationship with a bank, they may want to start there. Restaurants aren’t limited to just those banks they know, however, and can search around to find the right lender to meet their needs.

Advantages of traditional bank funding include competitive interest rates and large loan limits, which can help companies expand or refinance costly debt. Banks tend to work best with established restaurants, meaning it may be difficult for new or small businesses (like food trucks) to get the funding they need. Like SBA loans, the longer timelines could shut out restaurants that need quick cash to repair equipment or boost supply inventory during busy seasons.

Equipment financing.

In the case of a broken fryer or outdated appliances, restaurant owners may find equipment financing a suitable solution. These loans are made specifically for purchases of physical goods like ovens, refrigerators, POS systems, or other specialty restaurant equipment.

Anything bought with the funds becomes collateral for the loan money, so the lender gets some assurance of repayment (or they can take back the equipment). This creates less risk for the financing company, making them more willing to work with new or small restaurants, as well as those with weaker credit histories.

Approval can be very quick and allows restaurant owners to update their locations as needed without delay.

Business lines of credit.

A business line of credit is very flexible and gives business owners a set amount of money they can borrow from again and again. Whether it’s for payroll, inventory, marketing, or other needs, the money remains available as long as the account stays open, and the lender only charges interest on what’s used. It’s similar to a credit card in that way, but it can be taken out as cash.

Lines of credit may be appropriate for restaurants that need cash for seasonal swings or don’t need the large one-time lump sums of a traditional bank loan.

Short-term loans.

When a restaurant only needs cash for a short time, and long loan processes won’t do, a short-term loan can fill the gap. These loans are designed to be paid back quickly, within months, and have a higher interest rate than typical funding programs. They can be used for repairs, staffing shortages, when cash flow gaps appear, and when there’s no time to wait for more comprehensive lender underwriting.

Revenue-based financing.

Revenue-based financing, such as merchant cash advances give restaurants access to funds that are paid back incrementally through credit card transactions. They are best suited for restaurants with high credit card volume, as the repayments happen based on daily or weekly sales.

These loans work aren’t different than other cash advance options, in that they are easier to qualify for but charge higher interest rates.

Invoice financing for catering or B2B accounts.

Limited to catering services and those with large corporate accounts, invoice financing converts part of the value of unpaid invoices into a cash loan. The lender then collects on the invoice, taking some or all of the accounts receivable balance.

Costs for these services vary, and lenders may buy the invoices outright or let you continue to collect yourself (taking a portion of what you receive). The financing may appeal to businesses with uneven cash flow situations or that need more money to expand.

How to choose the right option.

All these funding choices have just one thing in common: they can help food businesses survive in difficult times or tap into potential growth opportunities. Beyond that, they are very different and require you to ask questions to know what’s right for you.

Ask these questions before you begin:

• What do I need money for?
• How much do I need to borrow?
• How quickly do I need it?
• How do I repay the money?
• Will it impact my daily operations?
• What does the financing cost in charges, fees, or interest accrued?
• Can we afford monthly payments?

Since there’s no one-size-fits-all solution, consider bundling multiple funding sources or relying on a different loan type at different parts of your business journey. Lendio can help you cut through the noise and find the lenders best matched to your needs, credit score, and timeline.

Every nonprofit knows their mission matters, but without steady funding, making an impact can feel like a constant struggle. Loyal supporters and fundraising events play an important role, but the right nonprofit financing options can often make a huge difference.

Many nonprofit organizations assume they won’t qualify for a Small Business Administration (SBA) loan, and while this is true in many cases, there are some exceptions. The key lies in which specific SBA loan program you’re applying to and the organization’s activities. Here’s what you need to know.

How the SBA views nonprofits.

The SBA was created to stimulate economic growth by supporting for-profit small businesses. While the organization isn’t opposed to nonprofits, many fall outside its primary lending scope.

However, when a nonprofit’s operations overlap with commercial activities, the doors to SBA funding may begin to open. For example, programs that support job creation, community development, or revenue-generating services may meet SBA criteria.

Scenarios where a nonprofit may qualify for an SBA loan.

There are three common cases where an SBA loan for nonprofits may be possible. If your organization fits into one of these categories, you may benefit from exploring your options in greater detail.

Community Development Corporations (CDC)

The SBA 504 loan program helps finance major fixed assets, such as real estate or equipment. Nonprofits working through Certified Development Companies (CDCs) may qualify for funding if their projects support economic development goals, such as creating jobs or revitalizing underserved areas.

For example, a nonprofit that plans to purchase a building that will house workforce training programs or community services tied to job placement may meet the criteria.

Fee-based social enterprise.

A nonprofit that operates a revenue-generating arm, such as a café, thrift store, or consulting firm, may qualify as a small business affiliate if it is structured as a separate taxable entity. This earned income model may help demonstrate business viability, which could potentially also strengthen the funding application.

Real estate tied to economic development.

Nonprofits that own or plan to acquire real estate for economic development purposes may qualify. Some examples include affordable housing development, business incubators, or community facilities that create jobs or serve low-income populations.

Qualification challenges for nonprofits.

Unless they fall into one of the scenarios above, most charitable, religious, and community organizations will generally not meet SBA lending standards. This is particularly true for SBA 7(a) loans, which provide small businesses with funding for working capital and equipment financing. Since nonprofits aren’t profit-seeking by definition, it’s common for them to be automatically precluded from qualification.  

For nonprofits with a revenue-generating function, qualification for SBA financing may be possible, but only if you can also demonstrate business viability and an ability to repay the loan.

Many nonprofits are better served by exploring other funding solutions, applying for grants, or seeking philanthropic funding to support their mission and programs.

How to strengthen your nonprofit application.

If your nonprofit falls into a qualifying category, the right preparation may help improve your chances of approval. Keep in mind that you’ll need to present your organization in a way that makes it look and feel like a business. Start with these tips.

Provide strong financial statements.

SBA lenders need to see organized financial records. This makes clean, accurate bookkeeping a top priority. If your books aren’t current and up to standard, fix this before you apply.

Demonstrate stable revenue.

Make sure you can show that you have a track record of consistent income. This may include government contracts, grants, membership fees, and income earned from programs. The more predictable your revenue, the more comfortable lenders may feel about approving the loan.

Prepare a clear impact plan.

Many SBA loans require applicants to present a business plan. When submitting an SBA loan nonprofit application, be prepared to show how the funding will strengthen your programs or expand community impact. Since SBA-backed loans must be tied to economic benefit, focus on measurable outcomes such as the number of new jobs created, people served, or facilities improved.

Gather your documentation.

Applying for an SBA loan requires more documentation than many grant applications. As you prepare your application, gather the following items:

• IRS designation letter: Proof of your 501(c)(3) status and tax-exempt classification.
• Board resolutions: Official statement from the board providing authorization to pursue financing.
• Financial statements: Year-to-date financials, plus two to three years of financial statements.
• Cash flow projections: Projected cash flow for the term of the loan, demonstrating a clear ability to make required payments.
• Organizational budget and funding sources: A breakdown of where the organization’s money comes from and how it’s spent.
• Program descriptions tied to economic outcomes: Detailed explanations of how your programs create jobs, support businesses, or drive community development.

Missing documentation is a common reason for denial, so take the time to double-check your file before submitting.

Explore your nonprofit financing options.

Nonprofits face unique financing challenges, and traditional banks aren’t always the right solution. However, if your organization runs programs that align with SBA goals, you may have more options than you think. If you’re unsure whether you may qualify, it may make sense to explore both SBA programs and other nonprofit financing options.