Lending Library

When you buy an existing business, you step into a living and breathing operation. There's a customer base that knows the name on the sign, a team that understands the day-to-day, and best of all, revenue already flowing in. It's the head start that many entrepreneurs dream about.

But even with those advantages in place, the cost of the initial purchase can be a massive hurdle. You either need a large amount of cash on hand or a lender who's ready to back the deal, which is where, for many buyers, small business financing becomes part of their story.

One option stands out for its flexibility: The SBA 7(a) loan. These government-backed loans under the 7(a) program make it possible to buy a business with a smaller down payment and longer repayment terms.

But to take full advantage of those benefits, you need to understand how the process works and what lenders are looking for, which is why we've created this guide. We’ll show you how an SBA loan can help you buy a business and why the 7(a) loan in particular is one of the most accessible options available.

Why use an SBA loan for business acquisition?

For first-time buyers, getting a traditional business loan can be an uphill battle. Many lenders want to see evidence that you’ve done this before, with years of experience behind you, strong financials, and collateral to back the loan.

An SBA 7(a) acquisition loan changes that dynamic. The U.S. Small Business Administration guarantees part of the loan, which, in turn, reduces the lender’s risk. This extra security makes lenders more willing to approve financing and offer lower down payments along with more flexible terms.

In many cases, you only need 10% of the purchase price upfront, and repayment terms can extend up to ten years, providing more breathing room during the early months of ownership. Even first-time buyers can qualify if they show experience that relates to the business and can present a plan the lender finds realistic.

If, at this point, you think you could benefit from an SBA 7(a) loan to acquire a business, the next stage is mapping out the steps involved in securing it:

Step One: Choose a business that lenders will love.

What lenders really want is confidence that the business will continue to perform. Signs of that include reliable income, a loyal customer base, and a name that carries some weight in your niche. So, keep those factors in mind as you start evaluating opportunities.

You might come across leads through brokers, platforms like BizBuySell, or referrals from people in your network. However you find them, what matters most is how the business holds up under closer scrutiny.

So, go through at least three years of:

• Tax returns
• Profit and loss statements
• Balance sheets

Go beyond the basics, too. Check for active leases, vendor contracts, licensing documents, and any debts the business might be carrying. These details help you and your lender understand what you’re really signing up for.

As we've already hinted at, lenders will also consider your background. So, it's worth remembering that if you’ve worked in a similar industry, that experience can help you stand out as a qualified buyer.

Step Two: Pin down the true value of the business.

Before the SBA approves your loan, the business needs to be appraised. If the deal is over $250,000 or involves a complete change of ownership, a formal valuation is typically required.

There are a few ways lenders calculate value:

• Seller's discretionary earnings (SDE) × industry multiple: This method is common for small businesses with steady earnings. SDE is a measure of the business’s total financial benefit to the owner, including salary, perks, and net profit. Lenders or appraisers multiply the SDE by an industry-specific number (called a multiple) to estimate the business’s value.
• Asset-based valuation: This focuses on the business’s physical assets. Things like equipment, inventory, furniture, and property. Instead of using the original purchase price, lenders want to know what those assets would sell for today. This method is typically used when a business has a large inventory of tangible assets and less predictable income, such as a manufacturer or retail shop.
• Third-party appraisal: Sometimes, the lender will need a third-party appraisal, especially for larger deals. At this stage, a certified appraiser will step in to give an objective view of the business's value. That number matters a lot since SBA loans can’t go above the appraised value.

Step Three: Structure the deal.

Once you have that figure and know a lender is on board, it’s time to decide how the deal will come together financially.

Most deals include:

• An SBA loan covering 70-90% of the purchase price
• Buyer equity of at least 10% (this shows your commitment and is required under SBA rules)
• Seller financing for the remaining balance (either as a loan or a standby debt)

Step Four: Prepare your SBA loan application.

By this stage, you’ll already have reviewed the business’s tax returns and financial statements with your lender in mind. Now it’s time to assemble the complete application package and apply for an SBA loan. This includes proof of the purchase agreement, such as a letter of intent or a signed contract, along with your business plan, two to three years of financial projections, your personal credit report, resume, and a list of assets and liabilities.

Step Five: Close the deal.

Once your loan is in motion, expect the process to take anywhere from 30-90 days.

A straightforward purchase can wrap up fairly quickly, whereas more complex deals involving multiple stakeholders often take longer if the lender needs additional information along the way.

The process typically moves through stages such as underwriting and credit analysis, any required site visits from the lender or SBA, a review of your documentation with follow-up questions about how the business will operate, and finally, loan approval and disbursement.

Once approved, funds are then transferred directly to the seller, and you’ll assume operational control on the agreed-upon closing date.

The smart path to business ownership.

Buying an existing business is a big step, but with the right funding, it’s one you can take confidently. At Lendio, we connect business buyers with SBA-approved lenders every day. Check your SBA 7(a) loan eligibility now and take the first step toward owning the business you’ve been looking for.

A business line of credit can be one of the most flexible financing tools available for small businesses. Unlike a term loan that provides a lump sum upfront, a credit line works more like a business credit card. You draw funds on an as-needed basis, repay the money you borrow, and only pay interest on the outstanding balance. That flexibility can provide a valuable safety net for cash flow gaps, unexpected expenses, or opportunities to expand your business.

Yet before a lender approves you for a business line of credit, you’ll need to meet certain eligibility requirements. Lenders carefully review your creditworthiness, time in business, financial history, and other risk factors to determine if you qualify. Understanding these requirements upfront can save you time, improve your approval odds, and help you secure more favorable borrowing rates and repayment terms.The following guide covers everything you need to know about how to qualify for a business line of credit. You’ll learn the key factors lenders review when you apply for a credit line, pitfalls to avoid, and the steps involved in the application process. We’ll also cover alternative financing options to consider if a business line isn’t the right fit for your company.

Key eligibility requirements for a business line of credit

When you apply for a business line of credit, a lender will look at several factors to assess your risk as a borrower. Specific eligibility requirements vary, but the following table provides an overview of the minimum requirements you typically need to satisfy when you apply for this type of financing.

Now, let’s dive deeper into the individual qualification details lenders often consider when you apply for a business line of credit.

Minimum credit score, revenue, and time in business

Your credit score is a major factor lenders rely on to determine eligibility for business lines of credit. Many online lenders require a minimum personal FICO® Score of 600 for an unsecured business line of credit. Though with certain business credit lines and business loans, the lender may consider your business credit score as well.

Credit standards tend to be tighter with traditional lenders, and minimum credit score requirements could be as high as a 700 FICO® Score. But for secured credit lines, lenders may approve borrowers with slightly lower scores.

Annual revenue also plays a critical role in your ability to access business funding. Every lender has different minimum borrowing criteria. But small businesses that generate $100,000 or more in annual revenue typically have a better chance of qualifying for revolving credit lines. 

Additionally, the longer your business has been in operation, the stronger its borrowing profile. Some lenders prefer financing applicants to have at least one to two years of operational history. Yet startups with 6 months or more in business may still qualify for a new credit line depending on the lender—especially if the applicant has good credit, collateral, solid cash flow, or other compensating factors.

Collateral and personal guarantees: What lenders expect

It’s possible to access an unsecured line of credit for your business, especially if you work with an online lender. Yet many traditional lenders prefer borrowers to put up some sort of collateral to back their business credit lines or loans. So, it’s no surprise that the Federal Reserve’s 2023 Small Business Credit Survey found that 55% of business financing applicants cited “no collateral requirement” as a main reason they chose an online lender over a bank.

Remember, with a secured line of credit you pledge business assets to back your revolving financing such as accounts receivable, equipment, or inventory as collateral. If collateral isn’t available, lenders often require a personal guarantee—a legal promise that you’ll repay the debt personally if your business cannot. This adds risk for the borrower but can increase your odds of approval.

Documentation requirements for business line of credit

Once you understand the basic eligibility requirements for a business credit line, the next step is preparing your documents. Organized records not only speed up the application process, but can also help you appear more professional to lenders.

Typical documentation for credit line application

Many lenders will request a similar set of documents when you apply for a business line of credit (though online lenders often require less documentation compared to traditional banks). To expedite the process, prepare the following documents in advance.

Having the right documents ready upfront demonstrates strong organizational skills and may increase your chances of approval.

How to apply for a business line of credit

Applying for a business line of credit involves more than simply filling out a form. Here’s a step-by-step guide to simplify the process. 

Step 1: Pre-qualification: Evaluate your position

Before you apply for a business credit line, assess your financial health. Review your credit scores, cash flow, and existing debt obligations. You can request your three personal credit reports (Equifax, TransUnion, and Experian) for free from AnnualCreditReport.com. It’s also possible to request your business credit reports and scores (often for a fee) from business credit reporting agencies like:

• Dun & Bradstreet
• Experian
• Equifax

Reviewing your personal and business credit information can help you understand potential strengths and weaknesses before you submit any financing applications. For example, if your revenue is strong but your credit scores are borderline, consider improving your credit first so you’ll be in a better position to qualify for competitive interest rates and borrowing terms.

Step 2: Compare lenders and key terms

Not all lenders are the same. Traditional banks often offer lower interest rates, but they may have stricter qualification requirements. Online lenders tend to be more flexible and faster with financing approvals, but may charge higher interest rates.

As you compare lenders, weigh factors like:

• Interest rates (APR)
• Credit limit
• Fees (annual fees, draw fees, prepayment penalties, etc.)
• Repayment terms
• Flexibility in drawing and repayment

The Federal Reserve’s 2023 Small Business Credit Survey found that 71% of business financing applicants received at least a partial approval (business lines of credit, loans, or cash advances) from online lenders. But when seeking funding from large banks, approvals dropped to 68%, and credit union approvals fell to 65% during the same period. These figures highlight the importance of shopping around.

Step 3: Submit the application and manage next steps

After you choose a lender, complete the application. Provide accurate financial information and attach all required documents.

Next, most lenders will perform a hard credit inquiry which may have a slight negative impact on your credit score. According to myFICO, the addition of one hard inquiry on your credit report results in a loss of less than five points from most people’s FICO® Scores. And hard credit inquiries only factor into your FICO Score for 12 months.

After you submit your application, you can expect a response. Possibilities include:

• Conditional approval
• Request for more documentation
• Application denial
• Collateral appraisal request (if required)

A final decision often happens within days (or sometimes sooner) with online lenders. With traditional banks and credit unions, it could take weeks to hear back about a decision. If a lender approves you, be sure to review the agreement carefully before you sign the final financing agreement. Pay close attention to interest rates, repayment terms, and whether the credit line is secured or unsecured.

Common pitfalls and how to avoid them

Even strong businesses can face financing denials if they make mistakes during the application process. Below are some common pitfalls to avoid.

What not to do when applying for a business line of credit

• Don’t exaggerate revenue. Lenders will verify the figures on your application and financial statements through tax returns and bank statements.
• Don’t submit incomplete applications. Missing documents could delay approval or result in the outright denial of your funding application.
• Don’t ignore personal credit. Many lenders review both business and personal credit scores when you apply for a business line of credit.‍
• Don’t overapply. Too many applications can trigger multiple hard inquiries, potentially lowering your credit score in the process.

Special considerations and alternatives

Although a business line of credit represents a flexible financing solution, they aren’t the ideal borrowing vehicle for every business. Some businesses may have a more difficult time qualifying for this type of financing and, as a result, may want to consider alternative borrowing solutions.

Who qualifies more easily?

Businesses with at least two years of operations, strong cash flow, and collateral typically have the easiest path to approval for revolving credit lines. However, startups with strong personal credit and solid business plans may still qualify with online lenders.

Pros and cons of alternative financing options

If your business doesn’t meet the standard borrowing criteria for a line of credit or if you want to explore other financing solutions. Here are a few alternatives to consider, along with some basic pros and cons of each.

Alternatives to business lines of credit

• SBA Loans: Backed by the government, SBA loans often feature competitive rates and longer repayment terms but can be harder to qualify for. (SBA Loan Programs)
• Business Credit Cards: Easier to qualify for than credit lines, these work well for smaller, everyday purchases.‍
• Short-Term Loans: Provide quick funding, but often come with higher interest rates.

Pros and cons of alternative financing options

Bottom line

Qualifying for a competitive business line of credit requires research, preparation, and an understanding of what lenders look for in a well-qualified applicant. But if you focus on your credit score, revenue, collateral, and documentation, there’s a good chance you may improve your approval odds.

If you don’t qualify today, don’t get discouraged. Strengthening your credit, improving cash flow, and building operational history is all progress in the right direction for future financing applications. Remember, each step you take improves your business’s financial foundation.

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If you run a construction company, you know how challenging securing the right financing for your business can be. Whether you want to expand your business, purchase equipment, consolidate certain business debts, or supplement your cash flow, an SBA loan could be the solution.

SBA loans offer flexible, affordable funding options to help contractors grow, stay liquid, and compete for larger jobs. From equipment financing to contract management, the right loan program could set you up for long-term success.

Why SBA loans work for construction firms.

SBA loans, like the SBA 7(a) and SBA 504 programs, are ideal for industries with:

• Capital-heavy operations (like vehicles or equipment)
• Project-based cash flow
• Long payment cycles (including delayed or staggered payment timelines)

But unlike traditional commercial construction financing options, SBA loans offer key benefits to smaller contractors, like:

• Lower interest rates (fixed)
• Longer repayment terms (usually 10 to 25 years)
• Lower down payments
• Higher approval odds for newer or growing businesses

Since these loans are partially government-backed, SBA lenders are often more willing to work with contractors—even those with uneven revenue or less time in operations. Because of this, many small businesses rely on these loans to fund their construction, renovation, and refinancing needs.

Top SBA loan types for contractors.

The SBA offers three main loan programs for contractors: SBA 7(a) loans, SBA Express loans, and SBA 504 loans. These are the main benefits of each, and which types of businesses they’re geared toward.

SBA 7(a) loan

SBA 7(a) loans are one of the most flexible options for small businesses. Construction companies can use them for working capital, equipment financing, expansion, debt refinancing, and more. Loan amounts cap out at $5 million and come with long repayment terms—up to 10 years (general use) or 25 years (real estate).

These loans are ideal for contractors with ongoing project needs, plans for future growth, and new acquisitions.

SBA Express loan

SBA Express Loans typically have a faster turnaround time than traditional business financing. However, interest rates may be higher. Loans cap out at $500,000. Collateral isn’t required for loans up to $50,000.

These are geared toward businesses seeking immediate working capital or smaller equipment purchases.

SBA 504 loan

SBA 504 loans are designed for purchasing fixed assets like heavy equipment or machinery, warehouses, or commercial real estate. They may also be used to consolidate or refinance certain business debts.

These loans are structured with 10- to 25-year repayment terms, fixed interest rates, and up to a 10% down payment requirement. The maximum loan amount is $5.5 million (with exceptions).

SBA 504 loans are best for contractors investing in large, long-term assets.

What construction companies can finance with SBA loans.

SBA loans for construction companies are versatile. Business owners can use funds for things like:

• Heavy equipment financing (excavators, backhoes, forklifts, trenchers, etc.)
• Vehicles (work trucks, trailers, fleet vehicles, etc.)
• Office expansion (either leasing or buying warehouses or land)
• Working capital for materials, labor, or insurance while waiting on project payouts
• Hiring new workers or subcontractors before project payments arrive
• Bonding and licensing costs (to meet or maintain business compliance requirements)
• Consolidating or refinancing eligible business debt
• New business acquisition

Check with different SBA lenders—and SBA loan programs—to find the right solution for you.

Overcoming construction industry-specific financing challenges.

Dealing with complex financing challenges as a construction business? Here are some solutions:

• Irregular cash flow—Use SBA funding to bridge gaps between billing milestones
• Delayed payments—Get a line of credit or working capital to meet payroll and vendor obligations
• Equipment depreciation—Spread out costs with fixed-rate SBA loans instead of using up all available cash
• New project acquisition and onboarding—Invest in mobilization before that first payment hits

SBA eligibility requirements for construction businesses.

Business loans for contractors, even loans through the SBA, come with their share of requirements. While every SBA loan program operates a little differently, these are the main SBA loan requirements:

• U.S.-based, for-profit business
• Meet SBA size standards (typically under $39.5 million in annual revenue)
• 2+ years in operation (lenders may work with startups with considerable experience and a strong business plan)
• Minimum personal credit score (usually 650+) and business credit score (usually 165+)
• Proof of ability to repay loan funds (can be shown through historical revenue, cash flow projections, or project pipeline)
• Collateral like commercial real estate, equipment, or accounts receivable (requirements depend on loan size)
• Personal guarantee (typically required for those with 20% business ownership)

SBA loans for construction companies may also have maximum revenue requirements. Specific lenders may have their own fees and other criteria.

How to strengthen your SBA loan application as a contractor.

Even if you don’t have the best credit or most established firm, you could still qualify for a business loan as a contractor. Here are some ways to overcome the odds:

• Show project history through completed projects and success metrics
• Include detailed cash flow projections (accounting for delayed payments and retainage)
• Highlight equipment financing needs and explain how new equipment will increase project capacity or ROI
• Provide lenders with relevant certifications and licenses illustrating business legitimacy and compliance
• Prepare a business plan with clear growth strategy and use of funds

Key considerations before you apply.

Ready to apply for business financing? Do these things first:

• Make sure you meet both the SBA’s and the specific lender’s eligibility requirements
• Consider seller financing for used equipment alongside an SBA loan
• Look for lenders experienced working with construction firms
• Review loan contract terms carefully
• Be prepared to explain slow periods and your ability to cover loan payments during off-seasons

Be sure to apply before you need the funds so you’ll have them when needed.

SBA loans help contractors grow.

As a construction firm, you could leverage an SBA loan to manage contracts, purchase equipment, fund growth, and even refinance certain debts. These loans can provide the reliable, flexible capital your company needs to take on bigger—and better—projects, build a stronger team, and succeed against the competition.

Ready to apply? Find the SBA funding you need with Lendio.

The retail industry has always been competitive, but recent shifts have turned up the pressure. Customer expectations are high, e-commerce is expanding at record speed, and the cost of doing business continues to rise. Yet, opportunities are still available to business owners who are prepared to adapt quickly.

Success often comes down to having the right amount of capital at exactly the right moment. Whether you’re looking to upgrade your online platforms, expand into new locations, or simply stock enough inventory to keep up with peak demand, a retail business loan from the Small Business Administration (SBA) could make all the difference.

Backed by federal guarantees, SBA loans offer retailers competitive rates, flexible repayment terms, and the ability to use funds for anything from inventory to store renovations. This financial backing can give you the ability to confidently invest in growth, more effectively manage seasonal swings, and take advantage of opportunities that come your way.

How to use SBA loans to tackle your biggest retail needs.

There are several different types of SBA loans for retail business, with options designed to address different priorities, timelines, and funding amounts. Here are a few ways you can use this versatility to your advantage.

Get flexible funding with SBA 7(a) loans.

With loan amounts up to $5 million and repayment terms extending to 25 years for real estate purchases, SBA 7(a) loans allow retailers to fund a broad range of needs. This can range from working capital and equipment purchases to refinancing certain debts or even acquiring another business, offering a significant advantage to retailers balancing multiple priorities.

Speed up inventory purchases with SBA Express loans.

When you spot a hot-selling product or need to stock up quickly for an unexpected surge in demand, waiting months for loan approval isn't an option. SBA Express Loans cap at $500,000 but offer much faster processing. They’re often approved within 36 hours. While interest rates are often slightly higher than some other SBA loans, they can be an excellent option for time-sensitive financing needs.

Build your retail presence with SBA 504 loans.

If you’re looking to purchase a storefront, warehouse, or major equipment, an SBA 504 Loan may be your best option. Specifically designed for real estate and fixed asset purchases or improvement, this loan option offers low interest rates and long repayment terms. Many retailers use 504 loans to enhance their customer experience and increase operational efficiency.

Start small with SBA Microloans.

SBA Microloans are often an excellent option for retailers with smaller funding needs. They make it easy to secure up to $50,000 with more relaxed qualification requirements. These loans also come with business counseling and support, making them ideal for first-time business owners or retailers expanding into new product lines.

What SBA lenders want to see in your retail loan application.

When applying for an SBA loan, it’s important to show the lender that you understand the factors that drive your business and have a clear plan for using the funding effectively. For retailers, a strong application highlights:

• Strong inventory turnover ratios: Show that your products move consistently and that you have systems in place to avoid overstock or stockouts.
• Proven location performance: Include foot traffic data, nearby business activity, and demographics that show your store’s potential.
• Integrated sales channels: Demonstrate how your e-commerce and in-store operations work together to reach more customers and drive year-round revenue.
• Realistic financial projections: Include seasonal variations in your cash flow forecasts. Lenders appreciate applicants who acknowledge slow months rather than projecting steady growth year-round.
• Solid management experience: Having a strong personal background or an experienced management team can make a big impact.
• Emergency cash reserves: Show that you have a backup plan (such as a credit line or cash reserves) to cover slow periods or unexpected expenses.

You don’t need to have every item in place to qualify, but the more of these items you can present, the stronger your application will be.

Turn your SBA loan into better inventory management.

Using retail loans for inventory financing allows you to maintain optimal stock levels without tying up your cash. To optimize this, set up automatic reorders based on sales velocity and use funds to take advantage of bulk purchase discounts during off-peak seasons. Just be sure to track your inventory turnover monthly to ensure loan payments align with actual sales cycles.

Put SBA financing to work for your next expansion.

Expanding your footprint can create exciting opportunities, but many retailers underestimate the time needed to reach profitable sales levels after opening the doors. To protect your investment, secure a small business loan before signing a lease and add a 3-to-6-month payment buffer into the loan amount. This will help cover expenses during the construction and initial ramp-up periods.

Invest in e-commerce and digital growth with SBA funding.

Many retailers use SBA loans to upgrade their online presence. This may include investing in features like an updated POS system, an improved online store, or mobile payment integration. Focus on choosing tech investments that directly increase sales or reduce operational costs, and treat them as long-term assets, matching repayment schedules to the returns they’re expected to generate.

Avoid these common SBA loan mistakes.

Even savvy retailers can sometimes make mistakes with their SBA loans. These three pitfalls typically cause the most problems:

• Over-leveraging during peak seasons: Don't assume holiday sales will cover excessive borrowing. Use conservative projections and keep emergency reserves for slower months.
• Inadequate cash flow planning: Map out your entire year, including seasonal dips. Plan for loan payments you can cover in your lowest revenue months, not your best ones.‍
• Inventory mismanagement: Track purchases and sales closely. Failing to maintain accurate inventory records may lead to noncompliance with SBA loan terms.

Create lasting retail success with your SBA loan.

When managed well, SBA loans can help retailers build sustainable, profitable businesses. To improve your chances of success, align the funds with a solid growth strategy, stay ahead of payment schedules, and stay compliant with program requirements.

Ready to explore SBA financing for your retail business? Lendio connects you with lenders who understand the industry and can help you find the right funding solution. Check your eligibility to get started.

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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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.

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.