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So, you’ve been approved for a small business loan—congratulations! You can now use that loan for the things you need, whether that’s expansion, new acquisitions, equipment financing, or bridging cash flow gaps.

But getting SBA approval is just the beginning. You’ll also need to plan ahead for cash flow deficits, keep up with compliance and reporting obligations, and manage your SBA loan funds effectively so your company can continue to grow and thrive with minimal financial risk.

Payment management and financial discipline.

A crucial part of SBA loan management is prioritizing loan repayment. After all, falling behind could negatively impact your finances and make it harder to qualify for future loans.

Here are some ways to ensure you keep up with payments.

• Set up automatic payments to avoid late fees—This is generally best if you have consistent cash flow and can guarantee sufficient funds in your account when payment comes due.
• Budget in loan payments—Add a separate category in your budget to ensure you don’t fall behind.
• Cut down on other expenses—If funds are tight, seek ways to reduce other expenses as needed to prioritize the loan.
• Pay more than the minimum when possible—If you have extra cash flow, put it toward your loan to pay it down faster (but check for a prepayment penalty first).
• Avoid taking on new debts—Managing an SBA loan is much easier when you don’t have additional debts to worry about.
• Pay down other debts—If you’re juggling several loans, look for ways to pay debts with higher interest rates or shorter terms to free up cash.
• Understand your payment schedule and terms—Review the loan details so you don’t get blindsided by irregular repayment due dates, high or variable interest rates, or fees.

Cash flow planning.

As a small business owner, you might experience periods of inconsistent or even negative cash flow. Planning ahead can help keep your financials on track and ensure you never fall behind on loan payments.

You can do this by:

• Creating payment calendars aligned with business cycles—This makes it easier to plan for upcoming expenses, revenues, and cash flow gaps.
• Building payment reserves—These can keep you going strong during slower months.
• Monitoring your debt-service coverage ratio (DSCR)—This shows lenders that your company can repay its debts (shoot for a DSCR of 1.00 or above).
• Tracking your cash flow—This will give you a better understanding of your company’s current liquidity, financial obligations, potential shortfalls, and future cash flow trends.

Need some extra guidance on cash flow? Check out Lendio's in-depth guide on cash flow management.

Consequences of payment issues.

Before taking on a small business loan, know that there are consequences to falling behind on payments. While the SBA offers temporary debt relief to some borrowers, not everyone qualifies.

Missing even one payment could put your loan in “delinquent” status. The lender may contact you requesting payment. In the meantime, interest and possible late fees will still accrue.

Left unpaid, your SBA loan will go into default—usually within a few months of that initial missed payment. At this point, a few things could happen:

• Late or missed payments can affect your business—and sometimes personal—credit score, making it harder to qualify for future financing.
• The lender could attempt to take any collateral associated with the loan (including business equipment or real estate) to recoup the financial loss.
• If you signed a personal guarantee, the lender may also seize personal assets like bank funds or your home.
• If your business or personal assets don’t fully cover the unpaid debt, the lender may request that the SBA pays the remaining amount (up to the government-insured percentage).
• Defaulting could trigger the acceleration clause (making you responsible for repaying the remaining balance plus interest all at once).
• The lender may continue to pursue repayment through a lien or wage garnishment.

If you’re starting to worry about falling behind on payments, reach out to your lender right away about your options.

Compliance and record-keeping.

Certain SBA loan programs have continuing compliance requirements. Here's how to maintain compliance while managing your SBA loan post-funding:

• Review the loan agreement for ongoing compliance or record-keeping requirements.
• Keep accurate documentation of SBA forms and certification (including SBA form 1050, which verifies loan proceeds were disbursed as intended).
• Keep clear records of your business's financials, operations, and fund usage in case of future review or audit.
• Stay on top of payments.

Lender relationship management.

It helps to keep the lines of communication open with your lender and, in the case of the SBA 504 program, Certified Development Company(CDC). Through proactive communication with your lender, you could potentially:

• Get ahead of potential issues before they arise.
• Work through challenges like past-due payments related to temporary cash flow issues.
• Restructure your loan terms to help manage payments.
• Discuss other solutions like debt refinancing, debt consolidation, or forbearance.
• Build a lasting borrower-lender relationship.

Planning and risk management.

As a small business owner, it’s important to plan for the unexpected. You can do this by:

• Monitoring your business’s real-time performance compared to its projections using KPIs, profit margins, cash flow, and other key metrics, alongside financial goals.
• Getting the right business insurance (ex. general liability insurance or commercial property insurance) to protect your firm against lawsuits, natural disasters, and accidents beyond your control.
• Building cash flow reserves to protect yourself against financial risk and economic downturn.

Find the right lender for your business.

Successful SBA loan management means knowing how you’re going to use—and repay—the funds. It also means understanding the risks and doing what’s needed to maintain compliance and set yourself up for success.

Part of this means finding a lender willing to work with you through the ups and downs of business ownership. If you’re thinking about getting financing for your small business, apply now through Lendio’s marketplace. We’ll help you find the right partner and solution for your needs.

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Owning your business space can be a smart step if you're looking for more control and stability. Not least because property ownership often brings with it more predictable costs and the freedom to shape a space around your needs.

But making the leap from renting to buying isn’t always straightforward. Many traditional loans often require large upfront payments, and that kind of financial pressure can make purchasing feel out of reach when you're trying to keep cash flow steady.

That’s the dilemma many business owners face. Let's say you're selling furniture online, and you have outgrown your leased space. Maybe the rent’s climbing too, and your hands are tied when it comes to renovations because the landlord won't allow them.

Buying might start to look like the smarter move, but with rising expenses and tight margins, that upfront cost feels impossible to justify.

SBA loans offer a more accessible path by giving small businesses the support to invest confidently and plan for long-term growth without putting their cash flow at risk.

The two most common are the 504 loan program and the 7(a) loan program, but which suits your needs best will depend on what you're hoping to finance. So, here’s what sets them apart, and how to know which one might be right for you.

SBA 504 loans.

The SBA 504 loan is explicitly designed to help small businesses finance the purchase or improvement of major fixed assets, such as:

• Buildings
• Land
• Large machinery

This program is unique because it brings together three partners:

• Your business
• A conventional bank or credit union
• A Certified Development Company (CDC) (which is a nonprofit organization backed by the SBA)

Together, they share the financing:

• The bank usually covers 50% of the loan
• The CDC typically contributes 40%
• Your business puts down the remaining 10% (though newer businesses or special-use properties may need to contribute a little more)

What makes the SBA 504 loan appealing.

One of the clearest advantages of the 504 loan is its lower down payment. Compared to a traditional commercial loan, the upfront costs are more manageable for many business owners. On top of that, most 504 loans come with fixed, long-term interest rates, so your monthly payments are easier to plan for.

What to consider before applying.

That said, the 504 loan isn’t built for every situation. You can’t use the funds for working capital, inventory, or to refinance debt. Also, because it involves multiple lenders, the approval process can take a bit longer and feel more complex compared to the 7(a) loan.

SBA 7(a) Loans.

If your business has a range of funding needs (not just real estate), then the SBA 7(a) loan might be a better fit because you can use it to buy or refinance commercial property, invest in equipment, cover working capital, or even acquire another business. It’s also a flexible option for making renovations or improving a leased space.

In terms of structure, the 7(a) loan allows you to borrow up to $5 million, with terms of up to 25 years for real estate. It's also worth noting that interest rates can be fixed or variable depending on the lender.

What makes the SBA 7(a) loan appealing.

This loan tends to move a little faster than the 504 process, and it’s often easier for younger businesses to qualify. The flexibility also gives you room to invest beyond property if that’s what your business needs.

What to consider before applying.

The trade-off is that variable interest rates can make your monthly costs harder to predict. Also, down payments and fees vary quite a bit between lenders, which can affect the total cost of the loan.

A note on personal risk.

When weighing up SBA 504 vs 7(a), it's worth thinking about the personal risk involved with each loan:

SBA 7(a) loans generally require a personal guarantee from anyone who owns 20% or more of the business. For larger loan amounts, lenders may secure the loan with collateral using all available business assets, and if that’s not enough, they might also require personal collateral like real estate. That can be a deal-breaker for some borrowers.

SBA 504 loans, by contrast, are usually secured by the property or equipment being financed. They typically don't involve placing a lien on your personal residence, which can be an important distinction if you're concerned about protecting your personal assets.

SBA 504 loan vs. 7(a) loan.

Both the SBA 504 loan and 7a loan are great financing solutions for small businesses, but they’re not created equal. Your particular business status and goals will dictate the ideal choice for your particular business. 

Compared to the SBA 504 loan, the SBA 7(a) loan is far more flexible. You can use it to fund real estate, working capital, inventory, supplies, equipment, and more. The SBA 504 loan, however, is fairly specific and designed to help small business owners purchase, lease, renovate, or improve commercial real estate, buildings, or equipment.

If you’re in need of working capital to purchase inventory or supplies or would like to fill cash flow gaps, for example, the SBA 7(a) loan is an excellent option. This is particularly true if you have collateral to provide and are looking for a faster application process. 

The SBA 504 loan, on the other hand, makes more sense if you’d like to finance real estate, buildings, or equipment and can prove you meet job creation, job retention, or public policy goals. You should also expect a slower application process.

Here is a direct comparison of SBA 504 loan vs. SBA 7(a) loan features, uses and requirements to help you make your decision.

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How to choose between an SBA 7(a) vs. 504 loan.

Choosing between an SBA 504 and a 7(a) loan boils down to your specific business needs, the nature of your project, and your long-term financial strategy. If your primary goal is to secure working capital, refinance business debt, or cover operational expenses, an SBA 7(a) loan offers the flexibility and versatility to support a wide range of business purposes. Its potentially larger loan amounts and the possibility to cover soft costs make it suitable for businesses seeking a more all-encompassing financial solution.

On the other hand, if your objective is to invest in fixed assets such as real estate or heavy equipment, an SBA 504 loan could be the better choice. With its low down payment requirements, fixed interest rates, and long-term repayment options, it's designed to make sizable capital investments more affordable. Additionally, the SBA 504 loan fosters community development and encourages long-term economic growth, providing not just financial but also societal benefits.

Ultimately, the decision should be informed by a thorough analysis of your financial situation, growth forecasts, and how the loan’s terms align with your business's cash flow and investment plans. Consulting with a financial advisor or a lending specialist can provide insights tailored to your specific circumstances, enabling you to make a well-informed choice between these two SBA loan options.

Do you qualify for an SBA commercial real estate loan?

Although SBA loans make it easier for small businesses to finance commercial property, there are still key eligibility requirements to meet. In general, you'll need to:

• Be a for-profit business based in the U.S. and operating in an eligible industry
• Use the property as your primary place of business (at least 51% owner-occupied)
• Demonstrate that you can repay the loan through strong financials, or if you're just getting started, a solid business plan

At this point, it's worth mentioning that lenders typically prefer businesses that have been operating for at least two years. However, that doesn't mean that newer ventures are automatically ruled out. If your plan is well-supported and you can show financial viability, you may still qualify.

You’ll also need to provide documentation as part of the application process, including recent tax returns, financial statements, and details about the property. Most lenders will also require personal guarantees from each business owner.

Business property financing that works for your organization.

So, if you want the stability of owning your long-term business premises, SBA real estate loans can help make it possible. As we've seen, the right choice depends on your goals and how you plan to grow, but no matter your path, Lendio is ready to help you move forward. Compare loan options and start your application through Lendio’s SBA loan marketplace today.

Because small businesses are so critical to the country’s success, the federal government launched the Small Business Administration (SBA) to help foster American small businesses. 

The most popular way the SBA furthers its mission is through SBA 7(a) loans—if your business qualifies, you can get funding backed by the government that can help take your enterprise to the next level.

What is an SBA 7(a) loan?      

An SBA 7(a) loan is a form of financing that is partially guaranteed by the U.S. Small Business Administration. These loans are named after Article 7(a) of the Small Business Act of 1953, which launched the SBA and tasked the agency with supporting American small businesses through lending.

SBA 7(a) loans are popular for financing real estate purchases, working capital, and purchasing furniture and supplies. They’re also commonly sought for refinancing existing business debt.

Are all SBA loans 7(a) loans?

SBA 7(a) loans are the most popular type of loans offered by the SBA, so many people refer to them as “SBA loans”. Keep in mind that 7(a) loans are a specific loan program offered by the SBA, and there are several types of 7(a) loans. In addition, the SBA offers other types of loan programs, such as the 504 loan program, that don’t fall under this umbrella.

What can an SBA 7(a) loan be used for?        

Proceeds from a 7(a) loan may be used for:

• Working capital
• Equipment purchases and or/ installation
• Acquiring, refinancing, or making improvements to Real estate
• New-building construction
• Renovation or expansion
• Starting a new business
• Purchasing an existing business
• Refinancing current business debt
• Purchasing furniture, fixtures and supplies
• Multiple purpose loans
• Changes of ownership

Loan proceeds may not be used to:

• Pay off an existing business loan
• Buy out a partner
• Pay delinquent state or federal withholding taxes
• Anything else that wouldn’t be considered a sound business purpose as determined by the SBA

Types of SBA 7(a) loans

The SBA has a suite of different financing products under its 7(a) distinction, and each one is meant to fill a different need in the small business ecosystem.

When considering your options, think about how large of a loan your business needs, your intended use of the funds, and how quickly you need the money.

SBA loans require a fair amount of information and paperwork, so researching 7(a) loan types will save you time later.

Standard 7(a) loan

The standard 7(a) loan is the most common and most popular type of 7(a) loan backed by the SBA. The purpose of these loans is to allow small businesses to expand by funding working capital or the purchase of equipment, supplies, and real estate. 

A standard 7(a) loan is available in amounts of $350,000 to $5 million. The maximum SBA guarantee is 85% for loans up to $150,000 and 75% for loans greater than $150,000. The SBA requires lenders to collateralize all standard 7(a) loans. 

For standard 7(a) loans, while it is the lender's responsibility to perform credit analysis, loan structure and verify that the applicant meets SBA eligibility requirements, the SBA makes the final approval decision before providing a loan number. 

7(a) small loan

The 7(a) small loan is similar in many ways to the standard 7(a) loans, but it’s meant for businesses that need smaller amounts of funding to get off the ground or expand. 

The maximum loan amount is $350,000. Their turnaround time and eligibility decision process are the same as standard 7(a) loans. The SBA guarantees 85% of loans up to $150,000 and 75% of loans over that amount. Collateral is not required for loans under $50,000. The lender follows its collateral policy for loans greater than $50,000.

Applicants can usually expect a decision in two to 10 business days.     

SBA Express loan

The SBA express loan is built for speed—sometimes, entrepreneurs need funding ASAP.

The maximum amount for an express loan is $500,000, and an application will be responded to in 36 hours or less. These loans are 50% guaranteed by the SBA. Only lenders with SBA Express authority can issue these loans, and the lender makes all eligibility, collateral, and credit decisions under delegated authority.

7(a) Export Trade Finance

The SBA has 3 core 7(a) international trade finance programs geared towards helping small businesses be competitive in export markets.

Export express loan

The export express loan was specifically created as a streamlined option for businesses in the export industry or those looking to develop an export operation. It has many similar features to an SBA Express loan, but provides a higher guarantee to mitigate international credit risk.

The loans, with a maximum amount of $500,000, have a breakneck turnaround time of just 24 hours or less. Similar to SBA Express, lLenders make all eligibility and collateral decisions through delegated authority. The SBA guarantee is 90% for loans of $350,000 or less and 75% for larger loans. This funding can take the form of a term loan, or a revolving line of credit that can last up to seven years.

Export working capital loan

Also tailored for exporters, the export working capital loan is meant to fund working capital for businesses that generate export sales.

These loans can range up to $5 million, and the SBA guarantee is 90%. Eligibility decisions are made by the SBA or lenders who have delegated EWCP authority. Unlike other 7(a) loans, there is no maximum interest limit imposed by the SBA for export working capital loans. The decision turnaround time is five to 10 business days. 

Collateral is required, usually in the form of export inventory and personal guarantees from a business’ owners. This loan can take the form of a term loan, or a revolving line of credit for three years or less.

International trade loan

International trade loans are SBA 7(a) loans aimed at businesses that want to grow their export side or need to modernize their operation to handle foreign competition.

The maximum loan amount is $5 million, and the eligibility decisions, turnaround time, and SBA guarantee are the same as for export working capital loans. For international trade loans, the loan maturity is set at 10 years for permanent working capital.

Equipment and machinery, loans mature up to 10 years or at the useful life of the equipment (not to surpass 15 years). Real estate loans mature at 25 years.    

7(a) CAPLines

CAPLines of credit are a form of a standard SBA 7(a) loan that works as a line of credit instead of a loan.

Remember, a business line of credit is a form of financing that allows businesses to access money as expenses arise, similar to a credit card. With a business loan, on the other hand, a full amount is disbursed upon approval, and repayments are made based on the approved amount.

The loan maximums, terms, and decision process of CAPLines of credit are the same as for standard 7(a) loans. The SBA offers four types of CAPLines:

Working Capital CAPLine

A line of credit for businesses that are unable to meet credit standards for other long-term financing, typically businesses that provide credit to other businesses, and in which repayment is based on assets.

To be eligible for a Working Capital CAPLine, your business must generate accounts receivable (not notes receivable), and/or have inventory.

Contract CAPLine

A line of credit aimed at financing businesses that work on a contract basis. Rather than permanent working capital, this specific type of working capital is meant to be used for working capital for one or more specific projects.

Builders CAPLine

A line of credit for small general contractors or builders that construct or renovate residential or commercial buildings. To be eligible for the Builders CAPline, you must be a construction contractor or a homebuilder with demonstrated experience in profitable construction or renovation.

Seasonal CAPLine

The Seasonal CAPLine is a line of credit meant for businesses that operate on a seasonal basis to help provide working capital for the busy season. To be eligible, your business must have been in operation for at least one year, and be able to demonstrate a pattern of seasonal activity. You can’t use this working capital to weather downturn or slow seasons, and must use it to finance increases in accounts receivable, inventory, and associated labor costs.

7(a) Working Capital Pilot (WCP) Program

Launched on August 1, the WCP pilot program offers monitored lines of credit to businesses through the SBA 7(a) loan program. 

Through the pilot program, eligible businesses can receive a line of credit up to $5 million. In order to qualify, businesses must operate in industries like manufacturing, wholesale, or professional services and have at least one year of operating history.

Businesses applying must be able to provide financial statements, accounts receivable, and accounts payable, as well as regular inventory reports.

The loan guarantee is the same as regular SBA (7a) loans.

Eligibility requirements for SBA 7(a) loans

Most U.S. small businesses can qualify for an SBA 7(a) loan, but there are a few exceptions such as nonprofits and certain restricted membership organizations. The SBA also requires that business owners meet basic criteria around location, profit status, size, citizenship and access to other financing.

For a full breakdown of eligibility rules - including disqualifiers, credit considerations, and ineligible businesses, read our guide to SBA loan eligibility requirements.

SBA 7(a) loan terms

SBA loans are meant to support long-term small business growth.

Loan maturity terms, as a result, are based on the ability to repay, the purpose of the loan, and the life of assets financed by the loan. Loan maturity refers to how long it takes for a borrower to repay the loan. At the end of your loan maturity term, you’ll make the final repayment. 

The maximum maturities for SBA 7(a) loans are as follows.

• The maximum maturity for real estate is 25 years.
• The maximum maturity for equipment is 10 years.
• The maximum maturity for working capital or inventory is 10 years.

SBA 7(a) loans used to buy fixed assets, like real estate or equipment, carry a maturity limited to the economic life of those assets, not to exceed 25 years. Fixed assets, which also include commercial property or furniture, are assets meant for long-term use that cannot be quickly converted to cash.

SBA 7(a) loan rates

With SBA 7(a) loans, the interest rate is set by the lender. In most cases, the lender will determine a rate based on creditworthiness, loan amount and repayment terms, and the applicant either accepts or rejects that rate. In many cases, you might be able to further negotiate the rate with your lender.

Current SBA loan interest rates are tied to the prime rate, which can be fixed or variable. As of August 5, 2025, the prime rate is 7.5%. The SBA allows lenders to add a markup, but caps how high the rate can go.

Want to see exact SBA rate ranges for the current month, caps, and how your rate is calculated?

See our guide to SBA Loan Interest Rates for current figures and the full breakdown.

SBA 7(a) fees                            

Along with interest rates, you should expect to pay a guarantee fee to the lender for SBA 7(a) loans. This fee will be based on the size of the loan and the type of 7(a) loan you apply for. Guarantee fees for 7(a) loans for fiscal year 2025 range between 2% and 3.5%. 

For a full table and breakdown of guarantee fees on 7(a) loans, read our guide to SBA guarantee fees.

Notably, the SBA expressly prohibits lenders from charging most other fees, including processing, origination, application, renewal, and brokerage fees.

Lenders are, however, allowed to charge a flat fee of $2,500 per loan.

Curious what you might pay on an SBA 7(a) loan? Use our SBA Loan Calculator to estimate your payments!

How to apply for an SBA 7(a) loan                     

While hundreds of different lenders offer 7(a) loans, the process is fairly standardized by the SBA.

The SBA 7(a) loan application process involves three main steps: choosing the right loan, gathering financial documents, and submitting your application to a qualified lender. Depending on the loan type, approval timelines can range from a few days to several weeks.

For a detailed checklist of required documents, step-by-step guidance, and tips to speed up the process, explore “How to Apply for an SBA Loan: Complete Steps and Requirements.”

Alternatives to SBA 7(a) loans

The requirements for SBA 7(a) Loans can be stringent. Maybe you feel it isn’t right for your business at this time! Here are some potential alternatives to SBA 7(a) loans to explore:

• SBA Microloans- These loans are smaller, and geared to newer businesses, but come with less strict borrower requirements.
• SBA Express Loan - These loans don’t require SBA review, which means you could work with a lender who can provide you funds you need quickly, with slightly less requirements than an SBA 7(a) loan.
• Lendio - While you can apply for an SBA loan with Lendio’s quick application, we can also connect you with online lenders to offer other flexible financing options that work for your business.

Ready to apply for an SBA 7(a) loan?

Apply for an SBA loan with Lendio’s quick application. We’ll connect you with the right lender for your situation, and can, on average, get you funded with a 7(a) small loan in less than 30 days.

Starting a small business is expensive. Almost every small business owner faces startup expenses, whether you’re a solopreneur needing a laptop or a construction company purchasing a lot full of heavy machinery. Inventory and equipment must be bought, employees or contractors must be paid, and rent comes due every month.

What’s harder, outside funding is often difficult to access when your company is young, but in need of capital. Startup business loans are a great way to bridge this funding gap—and even if you have a suboptimal credit score, there are forms of financing you can probably still access.

Best startup business loans for bad credit with easy approval.

The following list highlights lenders from our selection of best business loans that offer minimum credit requirements of 650 or below and a minimum time in business requirement of six months or less.

Additional lenders to consider

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Small business loan options for startups with bad credit.

If you’re starting a business with a lower credit score, there are several loan routes you can take. 

Service providers

As embedded financing unlocks new ways for business service providers and platforms to service their customers, financing options are now available in places you already frequent. From accounting software to e-commerce platforms, many tools you already use to run your business may offer access to capital directly within their interface—often with faster approvals and tailored options based on your business data.

SBA loans

While the SBA 7(a) and SBA 504 loan programs were created for established businesses, the SBA does offer two startup loans.

1. Microloans

The Small Business Administration's (SBA) microloan program is designed specifically to assist small businesses, start-ups, and nonprofit child care centers. This program offers loans up to $50,000, with the average loan being around $13,000. The funds can be used for various purposes including working capital, inventory, supplies, and machinery or equipment. However, microloans cannot be used to pay off existing debts or purchase real estate.

To qualify for an SBA Microloan, the borrower must meet certain criteria:

• Credit history - The borrower's credit history is reviewed. While there isn't a minimum credit score requirement, a good credit history can improve the chances of approval.
• Collateral - Depending on the loan amount, the borrower may have to provide collateral to secure the loan.

Remember, the SBA doesn’t provide the loan itself, but instead, it works with approved intermediary lenders to offer these loans.

2. Community Advantage 7(a) Loans

The Community Advantage (CA) program (now under the SBA 7(a) program) is another offering by the SBA, aimed at promoting economic growth in underserved markets. Community Advantage Small Business Lending Companies (SBLCs) can provide up to $350,000 in funding. These funds can be used for a range of business activities, including startup costs, expansion of an existing business, and working capital.

To qualify for a Community Advantage loan, certain criteria must be met:

• Credit history - Similar to the SBA Microloan, the borrower's credit history is assessed. While no specific minimum credit score is set, borrowers with a good credit history typically have a higher chance of approval.
• Collateral - Depending on the loan amount, collateral might be required to secure the loan. The specifics regarding collateral are determined on a case-by-case basis.
• Location - The business must be located in an approved underserved market. These included businesses located in Low-to-Moderate Income communities, Empowerment Zones and Enterprise Communities, Historically Underutilized Business Zones, Promise Zones, Opportunity Zones, and rural areas. Additionally, each lender is authorized to work within a certain state or group of states.
• Demographics: Underserved markets also include newer businesses in operation for less than two years, businesses that are at least 51% owned by veterans, or businesses with at least 50% low-income workers.

Remember, as with the SBA Microloan program, the SBA does not provide the loan directly. Instead, it works with approved SBLCs to provide Community Advantage loans.

Online lenders

In the realm of bad credit business loans, online lenders often emerge as a viable option for startups. These lenders provide a variety of financing options, many of which are designed with lenient credit requirements, specifically catering to business owners with bad credit. While online lenders also offer SBA loans and term loans with more stringent credit requirements, they also offer alternative forms of financing.

Business Lines of Credit

Many online lenders provide business lines of credit that allow businesses to draw funds up to a maximum limit as needed. Similar to a credit card, you only pay interest on the amount you use, making it a flexible financing option.

Invoice Financing

Online lenders often offer invoice financing, allowing businesses to borrow against their outstanding invoices. This can provide immediate cash flow while waiting for customers to pay.

Revenue-based financing

A revenue-based financing, sometimes called a business or merchant cash advance, is an upfront sum of cash in exchange for a slice of future sales. This can be a beneficial option for businesses with strong sales but poor credit.

Equipment Financing

Equipment financing is offered in the form of a term loan or equipment lease for the purchase of qualified equipment. Since the equipment serves as partial collateral for the loan, equipment funders often have less stringent credit score requirements.

CDFIs

Community Development Financial Institutions, or CDFIs, are private financial entities that are primarily dedicated to delivering responsible, affordable lending to aid low-income, low-wealth, and other disadvantaged communities. CDFIs play a significant role in generating economic growth and opportunity in some of the nation's most distressed communities. They can offer an array of financial products and services, including business loans, to help underserved communities join the economic mainstream.

CDFIs are found across the United States, and you can locate one near you by visiting the CDFI Fund's Award Database. This database provides information about CDFIs that have received financial awards or recognition from the U.S. Department of the Treasury.

In terms of requirements to work with CDFIs to get a business loan, it varies across different institutions. However, typical requirements may include a business plan, financial projections, personal and business credit history, and collateral. Some CDFIs may also require that the business operates in a specific geographic area or serves a particular community. It's recommended to directly contact a CDFI for their specific lending criteria and application process.

How to get a startup business loan with bad credit.

Navigating the world of business financing with poor credit can seem daunting, but it's far from impossible. Let's dive into the steps to get your startup funded, even if your credit score isn't quite up to par.

1. Evaluate your needs - The first step to obtaining a startup business loan is to evaluate your business needs. Understand how much money you need and what you will use it for. This clarity will help you determine the type of loan appropriate for your business.

2. Research your options - Research various loan options available for startups. Each type of loan has its own eligibility criteria and terms, including minimum credit score requirements. Compare those requirements to your current credit score to see if you may qualify.

3. Prepare your business plan - Lenders generally require a comprehensive business plan. This should include an overview of your business, details about your products or services, market analysis, organizational structure, and financial projections.

4. Gather required documentation - Gather all required documents such as financial statements, tax returns, and legal documents. The specific documents required will vary by lender, so make sure to check with them directly.

5. Apply for the loan - Once you have all the necessary documents and a complete business plan, apply for the loan. This process varies depending on the lender. It could be online or in-person.

Alternate forms of financing

In addition to a small business loan, there are alternate forms of financing that can be explored if you have a lower credit score.

Crowdfunding

Crowdfunding platforms like Kickstarter or Indiegogo allow you to raise capital through small contributions from a large number of people. This form of financing is often used by startups looking to launch new products or services, and it also offers an opportunity to validate your business idea in the market.

Venture capital

Venture capitalists invest in startups with high growth potential in exchange for equity in the company. These investments are high-risk but can provide substantial funds for your business, with the bonus of gaining experienced partners who can offer strategic advice.

Grants

Business grants are sums of money awarded by government departments, foundations, trusts, and corporations to help businesses get started or grow. The great advantage of a grant is that it doesn't need to be repaid. On the downside, competition can be intense, and the application process can be time-consuming.

Business credit cards

You will need a credit score of at least 650 to qualify for a business credit card, but if you meet that minimum requirement, a business credit card is a great way to bolster your credit even further while covering smaller, short-term expenses.

Personal loan

In some circumstances, you may qualify for a personal loan with a poor credit score. While this may not be the most ideal option, it could provide you with the funds you need to get your business off the ground. Just make sure to carefully consider the terms and interest rates before making a decision.

Whether you’re a seasoned investor or a novice entrepreneur, commercial real estate rates will always be a focal point guiding your investment decisions.

This article will simplify commercial mortgage rates, shedding light on key points of consideration and practical strategies to optimize your investments.

Current commercial real estate rates.

As of September 2025, we're seeing rates that range from about 5.15% to 15%, depending on the asset type and specific circumstances of the loan.

Key elements of commercial real estate rates.

Commercial mortgage rates are determined based on a combination of market factors, property-specific factors, the stance of the lender and borrower, and the loan structure.

Market conditions

Overall market conditions play a role in determining commercial real estate rates. Several macroeconomic factors contribute to rate fluctuations.

Economic factors

Commercial mortgage rates are influenced by broader economic conditions, such as inflation, economic growth, and the overall health of the economy.

Interest rates

The general level of interest rates in the economy—often indicated by benchmark rates such as the prime rate, LIBOR (London Interbank Offered Rate), or the U.S. Treasury yields—can impact the rates offered by lenders.

It's important for borrowers to carefully consider these factors and work with lenders to secure the most favorable terms, based on their financial situation and the specific details of the commercial property transaction.

Property-specific factors

The nature of the property itself will significantly impact mortgage rates, namely property type and location will also impact your final rate.

Property type

Different types of commercial properties may have varying risk profiles, affecting the interest rates. For example, rates for office spaces might differ from those for industrial properties.

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Location

The location of the property can impact rates. Properties in high-demand or economically thriving areas may have lower rates compared to those in less desirable locations.

Borrower's creditworthiness

Your creditworthiness and general financial situation will impact your rate.

Credit score

The creditworthiness of the borrower is a crucial factor. Lenders assess the borrower's credit history, financial stability, and debt-to-income ratio to determine the risk associated with the loan.

Business financials

Lenders may also evaluate the financial health and performance of the business occupying the commercial property.

Loan-to-value (LTV) ratio

The loan-to-value (LTV) ratio is the percentage of the property’s value that you’re looking to finance with the loan.

If you’re looking for a high LTV ratio, it means you’re seeking to borrow a larger portion of the property’s value, which could present a higher risk to the lender. Because of this increased risk, you may find that higher LTV ratios are typically accompanied by higher commercial mortgage rates.

Loan term and amortization period

Rates will also vary based on the length of the loan and the repayment schedule.

Loan term

The length of the loan term can influence the interest rate. Shorter-term loans may have lower rates but higher monthly payments, while longer-term loans might have slightly higher rates but lower monthly payments.

Amortization period

The time it takes to repay the loan (i.e. the amortization period) can also impact the interest rate. A longer amortization period may result in a higher overall interest cost.

Lender's policies and competition

Every lender's rates are impacted by its investment portfolio and competition.

Lender policies

Each lender may have its own criteria and policies, impacting the rates they offer. Some lenders may specialize in certain property types or industries.

Competition

The competitive landscape among lenders can affect rates. Borrowers may get more favorable rates if lenders are competing for their business.

Fixed vs. variable rates

Commercial mortgage rates can be fixed (i.e. unchanging throughout the loan term) or variable (i.e. fluctuating based on market conditions). Fixed rates provide stability, while variable rates may offer initial cost savings but involve more risk. Borrowers should choose the type of rate that aligns with their financial goals and risk tolerance.

SBA 504 loan rates: An option for small businesses.

For entrepreneurs seeking to finance major fixed assets like real estate or equipment, the Small Business Administration's (SBA) 504 loan can be a great option. The SBA 504 loan is known for its competitive and predictable rates, making it a popular choice among borrowers.

Fixed-rate loans under this program are tied to U.S. Treasury bonds, which typically carry some of the market's best rates.

• The rates for SBA 504 loans are set when the SBA sells the bond to fund the loan. This means borrowers can lock in a low, long-term fixed rate, protecting their business from future interest rate increases. The 10-year Treasury rate as of September 3, 2025 is around 4.3%.

It's also essential to understand that SBA 504 loan rates include two different loans—one from a Certified Development Company (CDC) and one from a bank or other financial institution.

• The CDC loan, which covers up to 40% of the total project cost, has a fixed interest rate.
• In contrast, the bank loan, covering 50% or more of the total project cost, can have a variable or fixed rate, depending on the specifics of the agreement.

Remember, despite these attractive rates, it's important to consider all aspects of your financial situation and business goals before deciding on a loan product. Consult with financial professionals to make sure you're making the best choice for your business.

Wrapping up

By familiarizing yourself with the primary elements that influence these rates, and keeping an eye on current market conditions, you’re already on the right path.

Whether you're considering a traditional commercial mortgage or exploring options like the SBA 504 loan, remember that the best choice will depend on your unique financial situation and business goals.

Yes, you can almost always get fast small business financing. Here are five small business loans that can fund in just 24 hours.

When your business needs a quick cash infusion to deal with unexpected expenses, seize growth opportunities, or meet urgent operational costs, fast business loans come to the rescue. These loans are designed for swift approval and funding—often within 24 hours—making them an ideal choice for situations where traditional loan processes may be too slow. 

This guide will walk you through the various options for a quick business loan, helping you make an informed decision that suits your business needs.

Fastest types of business loans.

Here are five quick business loans and other financing structures that provide fast approval times, as well as quick funding. The terms and repayment structures vary for each type of loan or financing, so take a look to see which might be the best option for your company.

1. Business term loan

A term loan is a lump sum of cash that is repaid with interest over a set period, typically ranging from one to 10 years. These loans are available through traditional banks, as well as alternative lenders and online platforms. The application process can take anywhere from a few days to several weeks, but certain lenders offer expedited application processing, approval and funding for those in need of fast business loans.

Individual lenders for business term loans will offer different terms, but these feature ranges are typical: 

• Loan amount: $5,000-$2 million
• Loan repayment term: 1-10 years
• Interest rate: 8.49% and up
• Funding time: As soon as same business day

Compare business term loan lenders.

2. Line of credit

A business line of credit is similar to a credit card. You have a credit limit you can draw upon at any time, and you pay interest only on the amount you draw. A line of credit can help cover short-term needs such as paying for inventory or seasonal changes in cash flow.

Features of a business line of credit can include:

• Loan amount: Up to $250,000
• Loan repayment term: 6-18 months
• Interest rate: 8% and up
• Funding time: As soon as same business day

Compare line of credit lenders.

3. Revenue-based financing

Revenue-based financing isn't a loan, but an advance based on future sales. This makes qualifying easier since the financing company considers revenue and sales more than your credit history. The repayment is an agreed-upon percentage of your income that comes directly from your bank account each day until your balance is repaid. This type of financing is ideal for companies with stable cash flow.

Features of revenue-based financing, also called a business cash advance, are as follows:

• Loan amount: Up to $2 million
• Loan repayment term: 3-36 months
• Factor rate: As low as 1.08
• Funding time: As soon as same business day

Compare revenue-based financing companies.

4. Equipment financing

Equipment financing is an excellent option for businesses that need to purchase or lease new equipment quickly. This type of loan covers a wide range of items like machinery, vehicles, office technology, and more. The equipment itself serves as collateral for the loan, which often results in more favorable terms, since the lender has a secure form of repayment. Depending on the lender, you might be able to finance up to 100% of the equipment cost.

Features of equipment financing are as follows:

• Loan amount: $5,000-$5,000,000
• Loan repayment term: 1-10 years
• Interest rate: 7.5% and up
• Funding time: As soon as same business day

Compare equipment financing companies.

5. Invoice factoring

Invoice factoring allows you to get paid faster for your outstanding invoices. With invoice factoring, the financier will purchase your invoice at a discounted rate, giving you a percentage of the money upfront. Then, after the customer pays the invoice in full to the funder, you receive the rest of the money, minus a fee. Funds from invoice factoring can be available as soon as the same day. Plus, the factoring company handles collecting payment from your customers, freeing up your time and resources for other areas of your business.

Features of invoice factoring are as follows:

• Loan amount: Up to 85% of invoice value
• Loan repayment term: Up to 1 year
• Factoring fee: As low as 3%
• Funding time: As soon as same business day

Compare invoice factoring companies.

When to get a fast business loan.

While speed to funds is one factor to consider when comparing business loan options, it’s important to compare multiple factors when selecting a business loan including the total cost of the loan and the maximum loan amount. In some cases, waiting a few more days or weeks will allow you to work with a lender who can offer more favorable terms.

Some common reasons to get a fast business loan include:

• Immediate working capital needs
• Unexpected business expenses
• You don’t qualify for a traditional bank or SBA loan

Fast Small Business Administration (SBA) loan options.

In some scenarios, the Small Business Administration (SBA) provides expedited loan options that offer both speed and beneficial terms, making them a worthwhile consideration for businesses in need of swift funding.

SBA Express Loans

An SBA Express Loan is a variant of the popular SBA 7(a) loan with a faster approval time. This expedited process, often within 36 hours, offers loan amounts up to $350,000.

Applying for an SBA 7(a) Small Loan with Lendio.

Lendio offers a convenient SBA loan application process. While it might take 30 to 90 days with your local bank, potential borrowers can complete an application and get a pre-approval within 24 hours, and after providing the required documentation, can get funded with a 7(a) small loan in fewer than 30 days.

How to get a fast business loan.

Follow these steps to obtain fast business funding:

1. Determine your needs - Understand the exact amount you require and the purpose of the loan. Make sure a fast business loan is the right choice for your needs.

2. Check your credit score - Lenders will consider your personal and business credit scores when determining approval and rates. Ensure your credit is in good standing to increase your chances of approval.

3. Gather necessary documents - This usually includes business and personal tax returns, bank statements, balance sheets, and a detailed business plan. Having these documents ready can speed up the process significantly.

4. Compare lenders - Different lenders offer different terms, requirements, and rates. Research and compare multiple lenders to find the one that best fits your needs.

5. Submit your application - Complete your loan application with your chosen lender. Be thorough and accurate to avoid unnecessary delays.

Remember, while fast business loans provide quick access to capital, they may come with higher rates and shorter repayment terms. Consider all your options and understand the terms before making a decision.

Pros and cons of fast business loans.

Just like any financial product, fast business loans come with their own set of benefits and drawbacks. Understanding these pros and cons can help you make a more informed decision.

Pros of fast business loans:

1. Quick access to capital - The most significant advantage of fast business loans is their speed. When your business needs funds immediately, these loans can provide cash within one business day, making them an ideal solution for emergencies.

2. Simple application process - Fast business loans typically have a straightforward online application process that can be completed within minutes, without the need for extensive paperwork.

3. Potential for approval with bad credit - Many fast business loan providers are more flexible with credit score requirements, which can be beneficial for businesses with a less-than-stellar credit history.

Cons of fast business loans

1. Higher rates - The convenience and speed of fast business loans often come at a cost. The rates can be significantly higher than those of traditional business loans.

2. Short repayment terms - Fast business loans usually must be repaid relatively quickly, often within a few months to a few years. This could potentially strain your cash flow.

3. Risk of debt cycle - If used improperly or over-relied upon, businesses may find themselves in a cycle of debt, taking out another loan to pay off the previous one.

Before applying for a fast business loan, weigh these pros and cons carefully. Consider how the repayment terms and rates will impact your business's cash flow and growth, and consult with a financial advisor if needed.

How to compare fast business loans.

When you're considering a fast business loan, it's all about striking the right balance between speed, terms, and cost. Here's how to navigate the maze and compare multiple options effectively.

Understand your urgency

Your first step is assessing the urgency of your financial needs. Do you require the funds within 24 hours, or can you wait a week or two? The urgency will narrow down your options and help you focus on lenders who can meet your timeline.

Know your numbers

Financial literacy is non-negotiable in the world of business funding. Calculate exactly how much you need, and more importantly, how much you can afford to repay. Use loan calculators and projections to understand the long-term impact of the loan.

Read the fine print

The devil is in the details. While speed is your priority, don't skim over the terms and conditions. Look for prepayment penalties, additional fees, and any other clauses that could affect your small business negatively.

Review the repayment terms

Fast business loans often come with shorter repayment terms. Ensure you can meet the daily, weekly, or monthly repayments without straining your cash flow. If you can't find a loan with terms that suit your business's financial rhythm, it may not be the loan for you.

Evaluate the total cost

The Annual Percentage Rate (APR) is a common benchmark for evaluating the total cost of a loan, especially for term loans, lines of credit and other traditional financing products.. The lower the APR, the cheaper the loan. However, APR isn’t the full story, and in many cases it may not be used. For example, some business financing products, like revenue-based financing or invoice factoring don’t charge interest. Instead, they use a factor rate or a fee-based model. Make sure you understand the fee structure for your loan, and also consider the application fees, processing fees, and any other costs that could push the total cost up.

Shop around

Don't settle for the first offer or even the third. Approach multiple lenders and use the competitive landscape to your advantage. You might find that you're eligible for lower rates or better terms than you initially thought.

Secure or unsecured?

Fast loans can be secured against your assets or unsecured, with no collateral required. While secured loans often have lower rates, unsecured loans are quicker and don't put your personal or business assets at risk.

Understand credit score repercussions

Applying for multiple loans can impact your credit score, so be strategic. If your credit score allows, consider pre-qualification offers that give you a rough idea of what you qualify for without a hard credit check.

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For Porters Bar, a family-run neighborhood spot, the summertime off-season meant slow months and ongoing bills. “We’d end up going into debt, and paying it back would take all season, so we couldn’t build up a pile of savings,” says owner Scott Nogueira.

After several traditional lenders, including his bank of 17 years, turned down his request for small business financing, Scott turned to Lendio. According to Scott, the loan he received “totally saved my business.” With access to the financing they needed, Porters Bar was positioned for growth, setting the stage to surpass $1 million in annual revenue.

Stories like this are familiar to many business owners. Finding reliable, affordable funding for everyday expenses is often one of the toughest parts of running a business. An SBA working capital loan may help bridge the gap between income and expenses, giving you room to manage daily operations without losing focus on your long-term goals.

Working capital loans support daily business operations.

The term “working capital” refers to the funds businesses use to cover operational expenses. This often includes items such as payroll, inventory, rent, utilities, and payments to suppliers.

Unlike long-term financing, which is often used for investments such as equipment or expansion projects, working capital loans typically have short- to medium-term repayment periods. They are designed to bridge the gap between costs and revenue, helping to keep businesses running smoothly from week to week.

SBA working capital loans are backed by the U.S. Small Business Administration. This lowers the risk for lenders, often resulting in lower interest rates, longer repayment terms, and higher approval rates when compared with traditional loans. The SBA guarantee may also improve approval odds for businesses that do not qualify for financing through conventional channels.

Choose the right SBA loan program for your working capital needs.

While there are several different types of SBA loans, only a few are well-suited for working capital needs. The right option depends on several factors, such as how quickly you need the funds, the amount of capital needed, and whether you have one-time or ongoing needs. Here are a few programs to consider.

SBA 7(a) Loans

The SBA 7(a) loan is the most flexible option and is also the most commonly used. Funds may be used for a wide range of purposes, including working capital, inventory purchases, and refinancing certain types of debt.

Loans are available for amounts ranging from $350,000 to $5 million, and when used for working capital, repayment terms can extend for up to 10 years. While rates are negotiated between the borrower and the lender, they must fall within SBA guidelines and are typically lower than conventional loan rates.

SBA Express Loans

SBA Express loans offer faster turnaround times, with decisions typically made within 36 to 48 hours. These loans are designed for smaller, time-sensitive needs.

Loan amounts cap at $500,000, with repayment terms similar to the standard 7(a). Interest rates may be slightly higher, but the application process is more streamlined, with fewer documentation requirements.

SBA CAPLines (Lines of Credit)

The SBA CAPLines program offers four specialized lines of credit for small business owners. The first three are suited specifically for seasonal, contract, and construction businesses, while the fourth is a general-purpose line of credit for day-to-day business operations.

Unlike loans, lines of credit allow you to draw funds only when needed, up to a maximum approved balance. Due to the added flexibility, CAPLines may have slightly higher interest rates when compared to other types of SBA loans.

Common uses for SBA working capital loans.

When incoming revenue can’t keep up with expenses, many business owners turn to a working capital loan to help cover critical costs and avoid disruptions. Common uses include:

• Payroll: Ensuring employees are paid on time and keeping the business fully staffed, even during slower periods.
• Vendor payments: Covering the costs of necessary inventory and avoiding late payments, protecting supply chains and vendor relationships.
• Marketing and promotions: Funding short-term campaigns to boost visibility and drive sales, particularly during the off-season.
• Fixed operating expenses: Managing rent, utilities, and other fixed costs that continue regardless of business cycles.
• Covering accounts receivable gaps: Smoothing over delays in payment or billing cycles that create cash flow disruptions.

While these are some of the most frequent uses, you can use working capital loans to address nearly any operational expenses that affect your daily cash flow.

Unique advantages of SBA working capital loans.

Government backing gives SBA working capital loans several advantages that traditional financing typically can’t match. They often come with lower interest rates and longer repayment periods, giving you more time to stabilize monthly cash flow without the added pressure of aggressive payment schedules. You'll also have the flexibility to use the proceeds for virtually any operating expense, making them well-suited to a range of industries and needs.

SBA loan programs are designed to improve access to funding for underserved groups, such as minorities, women, and veterans. This may result in greater access to cash flow solutions, even for those who were previously denied a loan with a conventional lender.

Eligibility criteria for SBA working capital loans.

To qualify for an SBA working capital loan, you must own a for-profit business based in the United States. The business must also meet the SBA’s size standards, which typically include having fewer than 500 employees.

While there’s no universal SBA loan credit score requirement, most lenders prefer businesses with strong credit. However, SBA Express Loans and CAPLines may allow for slightly lower scores. Generally, lenders prefer applicants with at least one to two years in business, though startups with strong business plans or secured contracts may also be able to secure funding.

It’s critical to show consistent revenue and demonstrate an ability to repay the loan. One way lenders evaluate this is through your current ratio, which measures whether your current assets are sufficient to cover your current liabilities. It's calculated by dividing current assets by current liabilities, with a ratio above 1.0 generally being considered a sign of good short-term financial health. In some cases, SBA loan approval may require you to make a personal guarantee or put up collateral, especially for higher loan amounts.

How to successfully apply for an SBA working capital loan.  

A bit of preparation can go a long way toward strengthening your SBA loan application and expediting the approval process. Start by organizing your financial documents, including:

• Recent personal and business tax returns
• Profit and loss statements
• Balance sheets

Be prepared to clearly explain how you'll use the funds and how they'll benefit your operations or support growth. Vague requests can raise red flags, while detailed, thoughtful plans increase lender confidence.

Keep in mind that transparency builds trust. If your business has experienced revenue dips or faces seasonal challenges, explain these patterns and present a realistic recovery plan. Lenders appreciate honesty and want to see that you understand your business cycles.

Finally, explore multiple lenders before committing to a loan offer. Each lender may take a different approach to evaluating your application based on their specific criteria. Applying for an SBA working capital loan through a marketplace like Lendio may increase your chances of finding the right lender and loan terms for your needs. Check your eligibility today.

You might consider an SBA microloan if you’re trying to start or expand a small business.

But how exactly does getting a microloan through the SBA work? What do you need to meet the requirements? What do terms look like? How do you get started with an application?

We’ll answer  all these questions in more in our guide to SBA microloans. We’ll explain how it all works, highlighting requirements, current interest rates, microloan lenders, alternatives, and how you can apply today.

What is an SBA microloan?

The SBA microloan program consists of small loans funded by the Small Business Administration. However, these loans don't come directly from the SBA to the borrower. Instead, the SBA provides the funds to a network of intermediary lenders, such as community based nonprofit lenders.

This network then provides microloans to eligible small businesses and certain childcare centers. Participants in the nonprofit lender network are selected not only for their experience in lending, but in management and technical assistance as well, so that these intermediaries can administer the microloan program effectively.

SBA microloans provide financing to traditionally underserved businesses, such as startups, women-owned companies, and minority-owned businesses.

Eligible businesses can borrow up to $50,000, but according to the SBA, the average microloan is around $13,000.

What can SBA microloans be used for?

Microloans can be used for many purposes, affording small businesses flexibility when needing to rebuild, re-open, repair, or improve their business.

Seeking an SBA microloan might be a solution if you are looking to:

• Access working capital
• Purchase or replenish inventory or supplies
• Replace or purchase furniture or fixtures in your business
• Purchase new machinery, or secure equipment upgrades

However, you can not use an SBA microloan to pay existing debts, settlements of lawsuits, trade disputes, fines or penalties, or purchase real estate. You also can’t use the SBA microloan for personal, non-business use.

SBA microloan requirements

The SBA microloan loan program is geared for early-stage businesses and startups, but all for-profit small businesses and certain nonprofit childcare centers are eligible.

Because SBA microloans target early-stage businesses and underserved business segments, the requirements for qualification are less stringent than other types of traditional loans. Even if you have limited credit history or lower income, you may qualify.

Of course, each intermediary lender will have its own eligibility requirements, but most will ask for some or all of the following:

• Collateral and/or a personal guarantee from the business owner
• Minimum credit score - 620 or higher is good to have, but intermediary lenders may accept lower scores
• Owner’s Personal finance history
• Business finance history, with current cash flow or cash flow projections
• A certain location within the lenders geographic service area
• A minimum amount of time in business

SBA microloan rates, fees and repayment terms.

Although the SBA places certain restrictions on intermediary lenders, such as not exceeding $50,000 in loan amounts, interest rates and fees are up to your specific lender.

The interest rates will vary depending on your lender, but they typically range between 8% and 13%. And repayments terms are available for up to seven years.

SBA microloans also cannot be made as a line of credit - the microloan is structured as a term loan.

Pros and cons of SBA microloans

Pros

• Easier to qualify for: If you’re a startup or don’t have much business history, it can be hard to qualify for a business loan. Microloans, on the other hand, come with less stringent requirements, having been built to provide financing to businesses that traditionally struggle to find funding. 
• Faster funding: If you apply for a traditional SBA loan, the application and funding process can take months to complete. In comparison, you could receive funding through your microloan in just 30 days. 
• Low interest rates: Like all SBA loans, microloans come with low interest rates. The rates will vary depending on your lender, but the average rate is between 8% and 13%.
• Flexible loan terms: SBA microloans come with repayment terms of up to 7 years, so your monthly payments are more affordable. 

Cons

• Small loan amounts: If you need to borrow more than $50,000, the microloan program might not be the best option for you. 
• Spending restrictions: SBA microloans do come with certain spending restrictions. For instance, you can’t use the funds to pay down existing debt or purchase real estate. 
• Lenders may charge fees: The SBA caps its fees, but individual lenders can charge their own fees. For instance, you may have to pay an application fee, loan processing fee, or closing costs.
• Availability is limited: Since SBA microloans are offered by nonprofit intermediary lenders, these loans can be harder to find. These lenders don’t have the resources and staff that larger lenders have, so these loans might not be available in your area.

Finding SBA Microloan Lenders

The SBA has hundreds of lending partners located across the country, and provides a comprehensive list of microloan lenders to help you find a match. 

Most lenders will require you to either speak to a lending specialist over the phone or apply in person. 

The lender you work with will inform you about any necessary paperwork and documentation to apply. In addition, some lenders may require that you complete a workshop or training program as part of the application process. 

As part of your paperwork, you’ll need to provide a range of information, including:

• Proof of identity
• Description of collateral
• Balance sheet data (income and expenses)
• Personal and business tax records
• Business details (industry, licensing, assets, leases, etc.)

Once you’ve submitted all the required paperwork, your application is complete, and your lender will review and process the loan.

Alternatives to SBA microloans

If you’re not sure if an SBA microloan is the right fit for your business, here are some alternatives to consider:

• SBA 7(a) loans: SBA 7(a) loans are a good choice for businesses that need larger loan amounts. These loans are available for up to $5 million, but the qualification criteria are more strict. 
• Business credit cards: A business credit card can be used for any business purchase, and the application process is relatively easy. If you go this route, look for a card with an introductory 0% APR. 
• Invoice factoring: If you have a lot of cash tied up in your unpaid invoices, invoice financing allows you to leverage your outstanding invoices to get access to capital. 

The bottom line

SBA microloans can help startups and small businesses access the capital they need. These loans are a good option for traditionally underserved borrowers, like women and minorities, or low-income community businesses. If you’re interested in exploring your loan options, you can use Lendio to quickly compare loan offers from multiple lenders.