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As a small business owner, you might assume you won’t qualify for financing without significant collateral. But with an SBA loan—backed by the Small Business Administration—you could get the funds you need even without traditional assets. However, you’ll still need to meet certain requirements and demonstrate an ability to repay.

Here’s the importance of collateral in the SBA loan process, what qualifies as SBA loan collateral, and how to navigate the process confidently and effectively.

What is collateral in business lending?

Collateral refers to the assets or property pledged to a lender in exchange for funds. If the borrower doesn’t repay what they owe, the lender can seize the asset instead.

Some small business loans—called secured loans—require collateral as it can reduce risk in case of borrower default. Unsecured loans don’t rely on collateral, which can make them riskier to the lender. Because of this, borrowers may face stricter lending criteria.

Collateral comes in many forms, and it may be physical or non-physical. The type of collateral and amount needed depends on the lender, loan program, and loan amount. But having it can make it easier for borrowers to qualify for funds.

Note that some lenders will only accept business assets as collateral. This may include the things your company owns, like machinery or commercial real estate. Others, including some unsecured loans, may require a personal guarantee. This is essentially a promise the borrower makes to repay their debt if their business cannot.

Want to learn more about the basics of collateral, including what typically qualifies as collateral and what to do if you don't have any? Here's everything you need to know about collateral for a business loan.

How SBA loans handle collateral differently

The SBA program is designed to help borrowers who may lack strong collateral but can provide proof that they can still repay their debt. Most SBA loans are guaranteed by the U.S. government up to the following amounts:

• 75% for most 7(a) loan programs above $150,000
• 85% for most 7(a) loans programs under $150,000

The SBA also guarantees up to:

• 50% for SBA Express Loans
• 90% for Export Working Capital Program, Export Express, and International Trade Loans

This partial guarantee means less risk to the lender in case of default. It also means SBA lenders may be more flexible with collateral requirements compared to traditional banks.

Of course, collateral is still important, and many SBA loans do require it. But a lack of collateral doesn’t automatically disqualify a borrower from financing.

Collateral requirements by SBA loan type

SBA loan collateral requirements depend on several factors, including loan amount and type. These are the typical guidelines for business owners and what qualifies as collateral for different SBA loans.

SBA 7(a) Loans

The SBA 7(a) loan program includes Standard 7(a) loans and 7(a) small loans.

Standard 7(a) loans come in amounts ranging from $350,001 to $5 million. They’re considered “fully secured,” meaning all assets being acquired, improved, or refinanced using the loan must be pledged to the lender. This also applies to additional fixed assets valued up to the loan amount.

Meanwhile, 7(a) small loans cap out at $350,000. Loans for $50,000 or less typically don’t require collateral. Anything above that requires lenders to take any available collateral.

For loans over $350,000, adequate collateral is preferred. However, the SBA won’t decline a loan solely for insufficient collateral if the borrower demonstrates the ability to repay.

SBA Lenders may file a UCC-1 lien to secure the loan against business assets. Check the loan agreement for details.

SBA 504 Loans

SBA 504 loans are secured by the fixed assets being financed. This is usually commercial property or large equipment.

These loans cap out at $5.5 million. The funds come from three sources:

• Bank or credit union (50%),
• Certified development company or CDC (40%)
• Borrower (10%)

With an SBA 504 loan, the bank serves as the first lien. There’s also generally a second lien position from the CDC portion of the loan.

SBA Express and CAPLines

These are similar to 7(a), but may have faster processes and varying collateral thresholds depending on lender policy.

The SBA Express program caps out at $500,000, but lenders may not require collateral for loans under $50,000. Loans exceeding that amount may have lender-specific requirements.

CAPLines has its own limits and requirements. These are largely based on the specific program.

Other SBA loans

Under the SBA program, there are several other small business financing options. Each one has its own collateral requirements. For example:

• Microloans—These cap out at $50,000, but intermediaries may require some kind of collateral
• Disaster loans—Loans exceeding $50,000 require collateral‍
• International trade loans—These cap out at $5 million and have separate collateral requirements

Types of acceptable collateral for SBA loans

Types of acceptable collateral for SBA loans include:

• Real estate—commercial or personal property (especially with equity)
• Business equipment—machinery, vehicles, computers, tools, etc.
• Inventory—retail or wholesale stock that can be sold or liquidated
• Accounts receivable—invoices due from customers
• Cash savings or deposits—from business or personal accounts
• Financial instruments—stocks, bonds, etc.
• Personal assets—personal property and a personal guarantee may be required

Personal guarantees

A personal guarantee isn’t physical collateral, but rather a legal commitment to repay the loan if your business fails. It may increase your chances of getting approved, but it also puts your personal assets at risk. This is because the lender can still come after you—and your personal property—for repayment.

The SBA requires personal guarantees from any business owner with at least a 20% stake in the company. Some lenders may require multiple guarantors or multiple individuals to offer a personal guarantee.

What happens if you don't have enough collateral?

If business collateral is limited, an SBA lender might accept personal assets instead. In some cases, such as with certain loans under $50,000, they may waive the collateral requirement altogether. You’ll still need to provide a personal guarantee, though.

Generally, lenders will document what’s available and evaluate based on factors like:

• Collateral
• Personal and business credit profile
• Any recent delinquencies or bankruptcies
• Business financials (including cash flow and debts)
• Your business plan
• Down payment (if applicable)

The SBA specifically states that loans should not be declined solely due to a lack of collateral. As long as there’s a reasonable assurance of repayment, you could potentially qualify. Lenders may also ask you to offer whatever assets you have, even if they don’t fully secure the loan.

Collateral is just one piece of the puzzle

SBA loan collateral requirements vary by program, loan amount, and other factors. But thanks to the SBA’s guarantee, small business owners may find it easier to access the funding they need even when traditional lenders would shut the door.

With the right financial foundation and preparation, most borrowers can find a path forward—even with limited collateral. If you’re ready to explore your options, consider applying now with Lendio.

An SBA loan may be just what you need to level up your business and stay competitive. While having a strong credit score improves your chances of qualifying and getting better loan terms, some lenders allow flexibility. It’s possible to get approved even with bad credit in some cases.

However, understanding SBA loan requirements can greatly improve your chances of hearing “yes” from a lender and can cut down on application time. This article covers the different loan types, minimum requirements, and steps you can take to improve eligibility, even if your credit is less than ideal.

Can you get an SBA loan with bad credit?

It’s true that a better score often leads to better credit terms, but approval can also depend on these factors:

• The specific loan program or type of loan you’re applying for
• The lender’s internal lending rules and policies
• Business characteristics such as your time in business, demonstrated success, and cash flow
• Whether you can put up large amounts of collateral
• Your specific credit issues (amounts owed, late payments, bankruptcies, etc.)
  

Because multiple factors play into how a lender assesses risk, there’s not a one-size-fits-all list of things to aim for. A business that’s lacking in creditworthiness may make up for it with a proven business plan and valuable collateral to secure the loan. Lenders look at the full picture, not just a credit score.

Best SBA loan programs for borrowers with bad credit

If your business got off to a rocky start or you’ve made some missteps in the past, you’re not shut out of financing. In fact, lenders report that a business’s overall financial position is the main thing they look at, not credit history.  

Because the individual lenders (banks, neobanks, credit unions) set additional requirements, on top of general SBA loan requirements, for their institutions, you may do best by shopping around. Here are the general loan options available to help you get started.

SBA Microloan Program

This SBA loan program focuses on underserved communities and startups, which often face unique challenges in starting and keeping a business going. The minimum credit score for these loans is typically around 620. (Although, because lenders each set their own internal guidelines, this can vary slightly.)

The maximum amount businesses can borrow through the program is $50,000, making this a better option for improvements, working capital, supplies, or equipment. The loan funds cannot be used for paying off debt or purchasing real estate, and average around $13,000 per loan. Plan to demonstrate creditworthiness with a strong business plan and a willingness to work with a technical assistance partner to improve your chances of approval.

SBA 7(a) Loan

This loan is admittedly a bit more difficult for those with bad credit to access. If you can show business strength, your chances improve. Things lenders may use to offset a low credit score include:

• Strong collateral (property, equipment) that can be used to secure the value of the loan
• Solid business cash flow
• Demonstrated history of being successful in your business for multiple years
  

Established businesses may achieve better results than startups and those without a proven track record of profitability.

Key requirements to offset poor credit

The saying, “credit isn’t everything,” may be true when it comes to SBA loans, as long as you can show lenders your other business strengths. Any or all of the following can work in your favor and help a lender overcome objections to past late payments, bankruptcies, and defaults.

• Time in business, especially if longer than two years
• Consistent revenue, increasing month over month
• A positive cash flow, with few if any annual losses
• A well-prepared business plan that shows your goals, details for improving profits, and plans for expansion (if applicable)
• A detailed explanation of how you’ll use the funds and pay the loan back over time
• Collateral, such as property, or personal guarantees of how you will cover the value of the loan in the event of an unforeseen business decline
  

Lenders generally don’t want to see recent bankruptcies, tax liens, or defaults on federal loans. If you have these on your credit report from years ago, be prepared to show evidence of how you’ve overcome or changed course.

Tips to improve your SBA loan chances with bad credit

Your credit score is a constantly changing metric that can show a bank you’re responsible enough to take on new credit. Because it changes often, there are steps you can take to improve it for the near future, possibly in time for your next SBA loan application.

Actions to take include:

• Pay off existing debts, or pay down as much as you can in the short-term
• Check your business and personal credit reports, correcting any errors you find
• Build your business credit, which can be used if your personal credit is weak
• Partner with a business advisor or community lender, who may be more open to businesses in your situation
• Start with a small loan (such as a microloan) and borrow only what you need
• Consider short-term loans, which can be paid back quickly to build business credit
  

Alternative paths if SBA loans aren’t an option yet

If, despite your efforts, you’re still not in a position to qualify for an SBA loan, you may still have choices.

Secured business credit cards require you to put down a cash deposit or collateral to access a line of credit, but they do offer credit benefits and liquidity you can use to grow your business.

Revenue-based financing and invoice financing agreements are like mini loans from the companies you get supplies and inventory from; they allow you to pay for your products in increments, instead of all at once.

Even small, short-term loans can build your repayment history and put you on track for a better credit score. This newer score may put you in the driver’s seat for a better, bigger SBA loan down the road.  

Credit isn’t everything

Can you access a business loan with poor credit? In some cases, yes! But being informed is part of the hard work needed to be sure you get the best terms possible. Come prepared with all the documents and a proper strategy for how you’ll use the money.

While you may not get approved for the full amount of your loan request, 28% of small businesses still get partial funding. Finding a lender that frequently services businesses like yours can greatly improve your chances. Ready to get started? Let Lendio help you with this first step of the journey.

Getting approved for an SBA loan is a big step and a huge relief for many small business owners. But approval doesn’t mean funds in hand. This guide breaks down what happens next, so you can stay ahead of the process and avoid delays.

If your SBA loan was just approved, take a moment to celebrate. You’ve passed the biggest hurdle in the process! But before those funds land in your account, you’ll need to complete one more important stage. SBA loan closing.

This stage is often misunderstood, especially by first-time borrowers. That’s why we believe it’s essential to provide small business owners with a clear understanding of what comes next.

So, in this guide, we’ll walk you through what happens after approval, what documents you'll need, and how long closing typically takes, so you can stay ahead and put your capital to work without delay.

Why SBA loans take time to close

SBA loans take longer to close than traditional loans because there’s more red tape. Since they’re partially backed by the government, lenders have to check every box (collateral, permits, compliance paperwork, etc.) before the funds are released.

Borrowers can support this process by staying proactive and organized, for example, by responding promptly and keeping documents up to date. This goes a long way towards avoiding unnecessary delays and keeps closing on track.

Please read our guide on what an SBA loan is to better understand how they work and why the closing process is more involved.

What happens after SBA loan approval?

After your SBA loan is approved, your lender will send over a Loan Commitment Letter. This lays out what needs to happen before closing can move forward, and usually covers:

• How much you’re approved to borrow, and at what rate
• The repayment plan you’ve agreed to
• Any collateral you’ll need to provide
• Additional requirements (e.g., insurance, permits, or licenses) that must be in place before funding

It’s worth going through this letter carefully. If anything looks off or unclear, ask your lender now rather than later. A quick conversation upfront can save you time and frustration down the line.

If you want to get a head start on your prep, read our guide on how business loans and taxes work to make sure you’re set up for tax season.

Key steps in the SBA loan closing process

The SBA closing process is pretty straightforward once you know what’s coming. While the exact steps vary depending on your loan and business, most borrowers go through a similar checklist:

1. Document collection and verification

Lenders often ask for fresh copies of key paperwork, even if you already submitted them earlier. This is because they need to confirm that your business still matches the terms of your approved loan.

In light of that, expect to resend things like:

• Personal and business financial statements
• Business licenses, permits, and insurance certificates
• Proof of business structure (such as Articles of Incorporation or an LLC Operating Agreement)
• Lease agreements or property-related documents (if real estate is part of the loan)

If anything is outdated or missing, your lender may pause the process. So, gathering these items in advance helps keep things on track.

2. SBA-specific documentation

After reviewing your paperwork, your lender will move on to the final SBA forms:

SBA loan authorization: This spells out the terms, things like the loan amount, interest rate, repayment schedule, collateral, and any extra conditions attached.

Proof of flood insurance (if applicable): If your loan involves real estate in a designated flood zone, flood insurance must be in place before closing. The policy must meet federal standards and name your lender (or the SBA) as the loss payee.

Environmental due diligence: If the loan includes commercial real estate (especially properties with past or current uses that may pose environmental risks), your lender may require a Phase I Environmental Site Assessment to identify any concerns.

Certification of use of proceeds (SBA form 1050): This form is required for all 7(a) loan disbursements. You and your lender must complete it at closing to confirm how funds will be used, consistent with the loan authorization. Supporting documentation (like invoices or wire confirmations) may also be required.

Other SBA forms and certifications: Depending on your loan type and business situation, you may be asked to complete additional documents, such as:

• SBA Form 159 (if you paid a broker or agent)
• IRS Form 4506-C (to verify business tax returns)
• Hazard insurance documentation (for collateral)
• Borrower certifications confirming no material changes since loan approval.

3. Legal and compliance requirements

Once the SBA-specific paperwork is out of the way, your lender will move on to the legal checks to confirm that your business is on solid legal ground and that everything meets SBA program rules.

You may be asked to:

• Sign legal documents that reflect the final loan terms
• Show that you’ve invested some of your own money into the business
• Provide proof that your location complies with zoning laws or environmental rules
• Back the loan with a personal guarantee or collateral

These steps are all about protecting both you and your lender while keeping everything above board.

Since SBA loans often require personal guarantees or assets as collateral, it’s worth understanding what happens if you default on an SBA loan and how to protect yourself.

4. Lender due diligence and final review

Right before closing, your lender will go over the details one last time to make sure everything lines up before funds are released. That could mean:

• Taking a second look at the title report, especially if real estate is involved
• Making sure all the collateral paperwork is in the file
• Following up with any lingering questions from underwriting

It’s routine, but important because it’s how lenders protect both sides before the loan goes live.

5. Signing the closing documents

This is the part where everything becomes official. You’ll go over the final loan agreement and sign documents like the promissory note, personal guarantee, and security agreement.

However, if real estate is part of your loan, there’s usually extra paperwork involved, like a deed of trust or lien filings. Some of those documents may need to be notarized. But don't worry, your lender will tell you what’s needed and when. These days, many lenders offer digital signing options to make things easier

6. Disbursement of funds

After you’ve signed all the paperwork and your lender has done a final review, the funds can be released.

How that happens depends on your loan and what it’s being used for:

Lump sum: For some loans, such as those primarily for working capital or refinancing existing debt, the full loan amount may be disbursed all at once directly into your business bank account.

In stages (draws): For projects involving construction, major renovations, or phased equipment purchases, funds are typically released in stages. This "draw" process allows the lender to monitor project progress and verify that funds are used appropriately at each phase.

Direct to third parties: Sometimes, the funds don’t go straight into your account. Depending on your loan terms, the lender might send the money directly to vendors like equipment suppliers or business sellers, or place it in an escrow account managed by a title company. This helps make sure the money gets used exactly as approved.

The typical timeline for fund disbursement is generally within 7–21 business days after the loan closing documents are signed. While some lenders, particularly those with highly streamlined or digital processes, may be able to release funds faster, it's prudent to anticipate this timeframe.

Get ready to put your capital to work

Once you close, the hard part is behind you. Now it’s time to focus on growth. It doesn't matter whether you’re purchasing new equipment, expanding to a second location, or managing seasonal cash flow; your loan is likely the key to moving your business forward.

Interested in a SBA loan? Lendio stays in your corner every step of the way, offering tools, expert guidance, and support when it matters most. If you're planning your next big move, our team is ready to help you make it happen. Start your SBA loan application today.

SBA loan rates are tied to a base rate that changes with the market. Lenders can charge borrowers a rate that falls somewhere between the base rate and the maximum set by the government.

Current SBA rate maximums range from 10.5% to 15.5%.

Explore the most popular SBA loan programs and their rate structures to find out which one is the best fit for your company. 

Before we dive in, get familiar with the basics in our SBA loans overview- a great place to start if you're exploring funding options.

How SBA loan interest rates work.

SBA loan rates are regulated by the U.S. Small Business Administration. Private lenders negotiate their own rates with each individual borrower. But the offered loan rate cannot exceed the maximum set by the SBA for each loan program. 

The maximum is tied to a base rate, which can be one of the following:

• Prime rate: The most commonly used rate, currently at 7.5%
• Optional peg rate: Updated quarterly by the SBA based on market conditions, currently 4.63%

The borrower is then charged a markup (a percentage over that base rate). That varies based on:

• Loan amount
• Type of SBA loan
• Loan maturity date

Current SBA loan rates (August 2025).

Here is how each SBA interest rate breaks down, based on the loan program and other details. 

SBA 7(a) loan rates

SBA 7(a) loans can be used for general working capital needs and have interest rates that can either be variable or fixed. Fixed rates have a higher premium but never change, even if the base rate increases over time.

SBA 7(a) rates range from 3% to 8% above the base rate. Use the following table to compare rates for different loan sizes and term lengths. The current (August 2025) Wall Street Journal Prime Rate is 7.50%.

Historical Prime rates

SBA 504 loan rates

SBA 504 loans are designed to purchase assets that help with job creation or business growth, such as new facilities, machinery, or renovating an existing property. These loans are available through certified development companies (CDCs) and offer fixed interest rates.

You can apply for either a 10-year or a 20-year repayment period. The SBA 504 rates are incrementally pegged above the current rates for 5-year and 10-year U.S. Treasury issues. The rate typically totals 3% of the loan amount. 

Historical U.S. Treasury rates

SBA Microloan loan rates

Microloans from the SBA help newer small businesses with startup or expansion costs. Borrowers can get approved for up to $50,000, although the average loan size is $13,000. The maximum repayment term is six years.

Microloan rates are based on the lender’s cost of funds.

Loans over $10,000: 7.75% over cost of funds

Loans of $10,000 or less: 8.5% over cost of funds

Expect SBA microloan rates to range from 8% to 13%. 

SBA Express loan rates

SBA Express loans allow for a shorter approval time, so you can get faster access to capital. In fact, you'll get an initial response within 36 hours. The maximum loan amount is capped at $500,000 and rate maximums are the same as SBA 7(a) loans.

SBA Community Advantage loan rates

The SBA Community Advantage loan program was created to help businesses in underserved markets. These loans were capped at $350,000. Interest rates were negotiated by the lender but were subject to the SBA's maximums. This program was sunsetted in October 2023.

Lenders under this program are now licensed as Community Advantage Small Business Lending Companies in the 7(a) loan program and will continue to provide access to financing to underserved communities.

Typical SBA loan fees

In addition to paying interest on SBA loans, borrowers may also pay an upfront SBA Guaranty Fee.

Upfront fee on SBA 7(a) loans

This fee is based on the approved loan amount, including both the guaranteed and the unguaranteed portions.

To calculate monthly payments for your SBA loan, visit our SBA loan calculator. Need help finding the best interest rate for your SBA loan or other business term loan?

Apply with Lendio today!

Update: BayFirst announced they would be discontinuing the Bolt loan program on August 4, 2025. Read on for alternatives to the program.

You can’t always anticipate your business needs. So, when a new opportunity arises, and you need funding fast, it’s good to know all of your available options. One popular option was until recently the SBA Bolt loan. It offered flexible business financing in a more streamlined way than what you may expect from SBA funding. These loans were built for speed and could be your fast-track option for small business financing when minutes really matter.

What is an SBA Bolt loan?

The SBA Bolt was a type of SBA 7(a) loan that limited borrowers to no more than $150,000 but had fewer business loan requirements to meet when applying. It had a faster approval process, too, so was ideal for those in a crunch to get funding for a time-sensitive need.

The Bolt loan was an offering issued by CreditBench, the small-business lending division of BayFirst. However, on August 4, 2025, BayFirst announced that they would be discontinuing the Bolt loan program.

Was the Bolt loan an SBA loan?

Yes and no. The SBA loan program doesn’t offer an official Bolt loan program. Instead, the “Bolt” loan designation was created by BayFirst Financial to market its expedited small-dollar SBA 7(a) loans. So, the Bolt loan was an SBA 7(a) loan, but the name for this segment of small-dollar loans was created by BayFirst.

Key features of the SBA Bolt loan for small businesses

SBA Bolt loans weren’t the only fast, small business loans on the market, but they did stand out for a few reasons.

1. Loan amounts were significant enough to make a difference in a business, but not so large that they needed extensive documentation or collateral.
2. Processing time was just days, so businesses received funding much faster than the weeks or even months of traditional business loans.
3. The streamlined application process required much less paperwork. Most businesses would have the documentation they need on hand (or could access it quickly).
4. The shorter 10-year repayment period helped businesses plan for the near future and not worry about being saddled with decades of additional debt.
5. Competitive interest rates made the SBA Bolt loans a more stable option compared to “fast cash” alternatives.

Application requirements at a glance

While the SBA Bolt loans may have been quicker to get, they still had minimum requirements to meet. These loans were for legitimate, proven businesses that could demonstrate creditworthiness.

Businesses had to:

• Be in an approved industry for SBA loans (no life insurance, lobbying, or primarily gambling businesses, among others)
• Be U.S.-based
• Meet the SBA’s standards for “small”
• Operate for profit
• Have 2 years of demonstrated operations (some small startups may also qualify)
• Show proof of revenue and ability to repay
• Be unable to get financing on reasonable terms from other sources

Alternatives to SBA Bolt Loan

Now that the Bolt loan program has been discontinued, you might be wondering what your other options are. Here’s a comparison of the SBA Bolt Loan against other small-dollar SBA loan programs.

SBA Bolt Loan vs. SBA Express Loan

Closest in speed and simplicity to the SBA bolt loan would be the SBA Express loan, a small-dollar SBA loan meant to eliminate excessive paperwork and decisioning. Of other SBA loan program offerings, the SBA Express loan reduces the number of forms and procedures required, and allows lenders to use more of their own loan analysis, procedures and documentation than other SBA loans.

SBA Bolt loans vs. other small business loan options

SBA Bolt loans were fast, flexible, and available to businesses that may have been shut out of other financing opportunities. Now that they have been discontinued, take a look at some other options available. Here’s how they compared to common business funding programs used by companies today:

• Traditional SBA 7(a) loans: Offer much larger amounts (up to $5 million) and broader use cases, but the approval and funding take much longer (weeks or more). Paperwork and documentation needs can be extensive.
• Term loans: Offer a lump sum that’s repaid over a set period, usually with a customizable term, and for larger amounts. Approval process can take longer, require physical collateral, and may not be guaranteed by the SBA or partner banks.
• Lines of credit: Offer flexible funding to borrow from again and again, instead of the single, one-time lump payout of a Bolt loan. Comes with a higher interest rate in most cases and can be harder for the average small business to qualify for. ‍
• Revenue-based financing: Provides upfront cash that is rapidly repaid through a percentage of daily sales. Comes with a higher interest rate and lacks a fixed repayment structure that helps businesses budget better.

Many SBA loan portals let you shop around to see what rates, terms, and limits you qualify for. Don’t be afraid to ask questions about these various lender offers so you know how the loan process will look and to ensure you get the best service – and deal!

Lendio makes a great first step in the process, showing you the loans you’re likely to qualify for, rates available, and the loan terms you can expect before you fill out all the paperwork.

SBA loans are one of the most popular ways for small business owners to secure affordable financing. Features like low interest rates and extended SBA loan repayment terms make funding more accessible, but they also create high demand, so competition for loan approval can be steep.

The loan application requires careful attention to detail. Accuracy is critical, and you’ll need to follow a clear set of steps. Otherwise, a single mistake could derail the process, costing you time and potentially leading to a loan denial.

Understanding exactly how to get an SBA loan approved and the top application mistakes to avoid could be the difference between securing the funds you need and starting over from scratch. Here’s what you need to know.

SBA loan applications require extra attention.

The SBA loan application process is more detailed than many expect. SBA financing has stricter requirements, leading to more paperwork and additional layers of review.

It’s important to note that the SBA does not issue loans directly. Instead, it partners with approved banks, credit unions, and online lenders that follow SBA guidelines for evaluating and processing applications.

The process typically starts with gathering financial documents, completing SBA-specific forms, and outlining a clear plan for how you’ll use the funds. Then, the lenders are required to verify every detail of your application and make sure your business is a solid credit risk. To pass this examination, it’s important to submit a complete, accurate, and well-documented application.

Common SBA loan application mistakes to avoid.

Even businesses with solid backgrounds and strong credit profiles can sometimes get tripped up during the SBA loan application process. Here’s a look at some of the most common mistakes business owners make, and how to avoid them.

Incomplete or disorganized documentation.

Lenders need a full picture of your business before they can approve your loan, so you’ll need to provide every requested piece of documentation. This includes:

• SBA Form 1919
• Recent tax returns
• Financial statements
• Your business plan
• A clear breakdown of how you’ll use the funds

Failing to provide these items can slow down your approval and could stop it altogether. Avoid this common mistake by creating a checklist and reviewing everything with a trusted advisor before hitting submit.

Underestimating the importance of credit.

When you’re applying for a business loan, your personal credit doesn’t matter—right? Actually, when you’re dealing with SBA loans, that’s not the case. Your personal credit history helps lenders evaluate risk, so that’s typically one of the first things they’ll look at. Make sure you’re prepared by reviewing your most recent credit report well ahead of time. This can help you identify errors or other issues that need to be addressed before you apply.

Overstating financial projections or revenue.

It’s tempting to present big growth numbers, especially when you’re excited about the direction your business is headed. But if your projections aren’t based on verifiable data or market trends, they can raise red flags. Lenders want to see realistic, well-supported forecasts, so be honest about your revenue. Back up your projections by explaining your assumptions and showing that while your goals are ambitious, they’re also grounded in reality.

Lack of clear loan purpose.

SBA lenders want to know exactly where the money is going and how it will help your business grow or stabilize, so vague or inconsistent explanations for how you’ll use the funds could raise more red flags.

The more specific your answers, the better. Whether you’re planning to use the funds for payroll, equipment, or working capital, make sure you can show that each dollar is tied to a clear business goal. This shows that you’ve given it plenty of thought and will use the money to make smart business moves.

Ignoring debt-to-income or debt-service coverage ratios.

Make sure you’re realistic about how much debt your business can afford to repay. Before approving a loan, SBA lenders look closely at your debt-to-income (DTI) and debt-service coverage ratio (DSCR). These calculations help assess your ability to handle an additional loan. If the numbers don’t make sense, they may deny your application, even if everything else checks out.

Before submitting your SBA loan application, carefully run the numbers and make sure the amount you’re requesting aligns with what your business can reasonably support.

Not understanding the SBA loan type you’re applying for.

Applying for the wrong type of SBA loan can delay your application or lead to a mismatch in funding. For example, an SBA 7(a) loan may work well for general business needs, while a 504 loan is better suited for purchasing real estate or equipment. And if your business is fairly new and you meet the requirements, you may benefit from applying for an SBA Microloan instead.  

To avoid this mistake, take the time to research your options or meet with a loan advisor who can help you choose the program that best fits your business goals.

Skipping the business plan (or submitting a weak one).

A strong business plan shows lenders where your business is headed and how you’ll get there. Generic, outdated, or incomplete plans can lead lenders to believe you haven’t fully thought through your strategy or aren’t committed to the long-term success of your business.

Creating a robust business plan is well worth the time and effort it requires. Make sure your plan includes your current financials, clear growth strategies, and a thorough competitive analysis. Demonstrating that your business plan aligns with the loan request helps lenders see that you’re thinking strategically and ready to use the funds with purpose.

Strengthen your SBA loan application.

Once you’ve sidestepped the most common SBA application mistakes, there are a few additional things you can do to make sure your submission is as strong and lender-ready as possible. Taking these steps can help speed up the process and may boost your chances of approval:

• Stay organized: Keep all of your paperwork in a digital folder so it’s easy to access and update
• Work with a professional: An accountant or small business advisor may help spot missteps before you submit
• Be transparent: Most challenges will come up during the review process anyway, so it’s better to be upfront. Let lenders know what you’ve overcome and how your business is stronger because of it
• Double check everything: Review the SBA’s official borrower checklist and lender guidelines before submitting your application

A complete, well-prepared application shows lenders you’re serious, and may make it easier for them to say yes.

Use the SBA application process to strengthen your business.

SBA loan application mistakes are fairly common. Even experienced business owners can miss a step, but with the right preparation, most errors are avoidable.

The application process is about more than completing paperwork. It’s an opportunity to polish your business plan, get a clear picture of your financials, and build confidence in exactly what you’ll do with the funds. Not only will this level of clarity help improve your chances of approval, but it can also help you run a more successful business.

Take the next step toward reaching your business goals. Explore SBA loan options with Lendio and check your eligibility today.  

The words “flexible” and “financing” don’t seem like they should be in a sentence together. When you think of financing, you may think of a stuffy banker stamping rejections on loan applications. Maybe you think about how your business is stalled in growth because you’ve reached the end of your credit line. It is not often that you think about financing options that are flexible to your needs. They do exist, however. Here are some flexible financing options for your small business.

Does your financing plan account for unexpected losses?

As we have all seen, life is unpredictable. Your business could be performing well, but then revenue may drop off a cliff for outside reasons. Here is where that flexibility will come in handy. The COVID-19 pandemic was terrible for small businesses, and it also shed light on some huge holes in small business finances. Many small business owners turn to personal funds to keep their businesses afloat because they lack cash reserves. If anything, the pandemic taught small business owners the importance of access to flexible financing and being prepared for unforeseen challenges.

Flexible financing options.

Many business owners found they were at risk of breaching their banking covenants with the sudden revenue loss. Some business owners were struggling to meet payroll. Others had to close altogether. To keep the lights on for your business, you either need a large cash reserve or flexibility in your financing. If you have maxed out a bank line of credit, do you have access to working capital from somewhere else? Is your bank willing to extend your credit limit?

Equipment financing

It is worth considering some supplemental financing options to round out your financing plan. Equipment financing is a great option that can unlock working capital to support your business growth. Equipment financing is a loan that you can use for specific reasons, like buying manufacturing gear or any other equipment you need for your business. If you are looking to upgrade your cybersecurity and tools because you have moved mostly remote, equipment financing can cover those costs. This type of financing will be a loan that probably has strict repayment terms, but you can use the money pretty flexibly for your business’s needs. 

Accounts receivable financing.

Accounts receivable financing can help you meet payroll while waiting to collect on your receivables. In simpler terms, the amount of capital you can access is based on the amount of capital you are waiting to collect from your customers. With accounts receivable financing, you can add to your team without the stress of adding to your overhead. Since it’s based on your outstanding invoices, it does not require a high credit score or lengthy time in business, which makes the approval requirements very flexible. This type of financing is similar to a line of credit, but the limit will not be as rigid. Typically, the higher your accounts receivable, the more capital you can access.

Line of credit.

A line of credit gives you some flexibility in drawing capital and repaying it. You don’t have to use all the money, and you only pay interest on the amount you use. Online lenders and traditional banks offer lines of credit, and it’s a great tool to have available if you want a more flexible financing plan.

Revenue-based financing

Revenue-based financing—also called a business cash advance— is basically a lump sum of cash that is repaid through daily or weekly withdrawals based on your future earnings. These are typically costly because the interest rates are high. Make sure you read your contract carefully before taking out a cash advance.

Which Flexible Funding Option Is Right for You?

Most of these financing options can work together to round out your financial plan. For example, you can use accounts receivable financing to cover your payroll and also take out an equipment loan to cover your production tools. You could use a cash advance alongside a line of credit. It is crucial to consider your business and your industry when signing up with a new lender. It’s best to choose a lender that knows your industry and can offer solutions to your unique financing challenges. Ultimately, your financing plan should include some flexibility to account for sudden gains or sudden losses.

Presented by QuickBooks Capital 

This article is presented in partnership with QuickBooks Capital, helping small businesses access flexible financing when it’s needed most.

Financing a seasonal business isn’t easy. You need up-front capital to prep for the busy season, and then you need ongoing cash to keep up with mid-season expenses and unexpected slowdowns. For many business owners, relying on sales alone isn’t sustainable.

First, we’ll explore how seasonal financing can support your day-to-day operations. Then we’ll dive into six funding methods that work well for seasonal businesses.

How to use seasonal financing.

Whether you're gearing up for opening day or navigating a mid-season rush, seasonal financing can be a powerful tool to keep your business operating smoothly year-round. 

Here are a few smart ways to put seasonal financing to work:

• Hire extra help to serve more customers during peak periods.
• Stock up on inventory before the season starts, or replenish mid-season to meet demand.
• Purchase equipment or make repairs to keep operations efficient.
• Launch marketing campaigns to build buzz ahead of your busy season.
• Cover cash flow gaps when income is delayed but expenses can’t wait.

6 financing methods for seasonal businesses.

1. Term loan.

A business term loan gives you a lump sum of capital that you repay over a set period—typically with predictable, fixed payments. It’s ideal for seasonal businesses that need funding upfront to prepare for their busy months, or bridge slower periods.

You can use a term loan to cover large expenses like equipment, inventory, marketing, or payroll. By spreading out your payments, you maintain cash flow flexibility while investing in growth. 

2. Business line of credit.

For seasonal businesses, cash needs can change quickly—and that’s where a business line of credit shines. You get approved for a set credit limit and can draw from it whenever you need funds, up to the limit.

A line of credit is especially helpful when you’re not sure how much you’ll need, or when you’ll need a financial safety net for surprise expenses. You only pay interest on the amount you borrow, making it a flexible, cost-effective option for covering instances like payroll, inventory restocks, or last-minute opportunities.

3. Accounts receivable financing.

Making strong sales doesn’t always mean you have cash on hand. If your customers take 30, 60, or even 90 days to pay, you could be stuck waiting on income you need right now.

That’s where accounts receivable financing—also known as factoring—can help. A factoring provider will buy your outstanding invoices and give you an advance (usually 80-95% of their value), then collect payment from your customers. Once paid, they’ll send you the remainder minus any fees.

Sometimes less money today is more valuable than more money tomorrow. If business is booming but your cash is tied up in accounts receivables, this can be a great way to get you the money you need to fund your busy season.

4. Revenue-based financing.

Revenue-based financing (RBF)—sometimes called business or merchant cash advance—provides a lump sum of capital that you repay as a percentage of your daily or weekly sales. That means your payments flex with your business—higher during the busy season, lower during the off-season. 

While this model can offer convenience and fast access to funds, it often comes with higher fees and less transparent terms than traditional financing options. Plus, lenders typically evaluate your recent revenue history, which could impact the accuracy of your true seasonal earning potential assessment.

RBF can be helpful in a pinch, but it’s best used after other options have been examined.

5. Small business credit card.

A business credit card can be a helpful tool for managing day-to-day expenses—like restocking supplies, covering minor repairs, or handling last-minute overtime costs. It functions similarly to a line of credit, offering revolving access to funds with flexible repayment.

Some cards come with generous credit limits (up to $50,000 or more), but they also tend to carry higher interest rates. It’s important to use credit cards strategically and aim to pay off the balance in full each month to avoid costly interest charges.

6. Equipment financing

The right equipment can make or break your peak season. Whether it’s a new register to speed up checkouts, a truck to expand deliveries, or a new espresso machine to handle morning rushes, investing in equipment can help you serve more customers and boost revenue.

Equipment financing is one way to spread out the cost of these purchases over time. In some cases, the equipment itself acts as collateral for the loan, making it easier to qualify without putting up additional assets.

An extra cash register or blender can help you process customers faster, helping you make more sales and capitalize on the peak season. More sales now is worth the monthly expense, especially since you'll own the new piece of equipment moving forward and can sell it at a later point if necessary.

Capitalize on peak season.

When you’re running a seasonal business, timing is everything. With the right financing in place, you can stock up, staff up, and step into your busy season with confidence. Whether you’re preparing months in advance or navigating a mid-season surprise, funding can give you the flexibility to perform at your best.

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