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Startups can qualify for SBA loans — in certain instances. Although you’ll typically need good credit, strong finances and multiple years in operation to qualify for an SBA loan, some lenders and loan programs are more amenable to new businesses.
Below, learn more about the best SBA loans for startups and how to get one for your small business.
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Best SBA loans for startups
The U.S. Small Business Administration offers three main loan programs — the 7(a), 504 and microloan programs. Each of these small-business loans may be an option for startups, depending on your individual needs, lender and qualifications.
SBA microloans
Loan amount: Up to $50,000.
Interest rates: Typically, 8% to 13%, but can vary based on the lender.
Best for: Managing and expanding a new business.
Use cases: Working capital, inventory, supplies, furniture, fixtures, machinery or equipment.
Targeted specifically to startups and other traditionally underserved businesses, the SBA microloan program provides loans of up to $50,000 with repayment terms of up to seven years. In fiscal year 2023, 25% of all microloans were issued to startup businesses, for a total of over $25 million.
The SBA microloan program is administered by a network of community-based lenders, which can set their own rates and eligibility requirements. These requirements are less stringent than other SBA loans, however, and small-business owners with poor credit or lower incomes can often qualify.
SBA 7(a) loans
Loan amount: Up to $5 million.
Interest rates: Vary based on lender, but maximums are set based on the prime rate. Maximums currently range from 11.5% to 15%.
Best for: Growing your business.
Use cases: Working capital, equipment, supplies, real estate, debt refinancing and changes of ownership.
SBA 7(a) loans are the most popular — and most competitive — type of SBA loan. You typically need a strong personal credit score (at least 650) or must be able to show several years of annual revenue to qualify. Many lenders also require that you have at least two years in business.
Some lenders are more flexible with their time in business requirements, however. U.S. Bank, for example, can fund startups who have been in business for less than two years, and even offers a faster loan process with reduced paperwork.
Similarly, Wells Fargo issues an SBA line of credit that’s specifically designed for startups. This product is also available for businesses with less than two years in operation.
Community Advantage lenders
Although the SBA has discontinued the Community Advantage loan, it has created a new license for lenders who previously participated in the program. Under this license, Community Advantage lenders can issue standard SBA 7(a) loans while continuing their focus on funding traditionally underserved businesses.
These nonprofit and community lenders typically have more flexible qualification requirements and can be a good option for startups and borrowers with challenged credit histories.
SBA 504 loans
Loan amount: Up to $5 million; select projects may qualify for up to $5.5 million.
Interest rates: Tied to the five- and 10-year U.S. Treasury notes and typically around 3% of the amount financed.
Best for: Purchasing or upgrading major fixed assets.
Use cases: Real estate, land, machinery, equipment and other similar purchases or upgrades.
SBA 504 loans are designed to fund large equipment purchases or facilities upgrades in order to “promote business growth and job creation.” You can borrow up to $5 million (some projects can qualify for up to $5.5 million) with a term length of 10, 20 or 25 years, depending on the loan.
Unlike other SBA loan options, 504 loans come from three places:
- Third-party lender (50%).
- Certified Development Company (40%).
- Borrower (10%).
Startup businesses (those with less than two years in operation), are required to provide 15% of the loan, however — 20% if you’re funding a special purpose property.
Like 7(a) lenders, not all 504 lenders are willing to work with startups. In many cases, you’ll need multiple years in business, good credit and strong finances to qualify for one of these loans.
How to get an SBA loan for a startup
1. Calculate startup costs
You can’t apply for a startup business loan until you know how much you need to borrow. Factor in one-time costs, such as permits, licenses and equipment purchases, as well as recurring expenses such as payroll, rent and inventory for at least the first year. This will give you a realistic picture of how much money you need to get your business off the ground.
2. Write a business plan
A solid business plan shows lenders you’ve thought of things like your target market, pricing structure, marketing costs, potential challenges and industry competition.
Include your startup cost calculation and a detailed funding request, along with projected income. The goal is to show lenders your business will be a success, especially if you don’t have multiple years of profits to lean on.
3. Evaluate your qualifications
Even if you don’t have several years in operation, it’s important to evaluate your other business loan qualifications before searching for a loan. You’ll want to consider common underwriting criteria, such as your personal credit score, cash flow, sales projections and available collateral.
You should also confirm that you can meet the standard SBA loan requirements. In general, you’ll need to:
- Be a for-profit business operating in the U.S.
- Meet the SBA’s definition of a small business.
- Be able to show your ability to repay the loan.
- Have tried to find alternative forms of funding before trying to get an SBA loan.
4. Choose a loan and lender.
Once you have a sense of where your business stands, you can determine which SBA startup loan option will be best for your needs. Then, find a participating lender.
You can use the SBA’s Lender Match tool to find a bank, credit union or community-based lender that participates in your chosen loan program. You can also reach out to any financial institution with which you have a previous relationship and see if it offers the SBA loan you’re looking for.
As you research and compare your options, you’ll want to consider factors such as interest rates, repayment terms, speed and customer support.
» MORE: Compare the best SBA lenders
5. Prepare your loan application and apply.
After you choose a lender, you’ll be ready to start your SBA loan application. Generally, these applications require extensive documentation, but the specific paperwork you’ll need will vary based on your loan program and lender.
Overall, you can expect to provide some, if not all, of the following:
- Business and personal tax returns.
- Business financial statements.
- Business certificates or licenses.
- Business overview and history.
- Business plan.
- Existing debt schedule, if applicable.
- Detailed collateral information.
- Business lease, contracts or purchase agreements.
- SBA Form 1919, Borrower Information Form.
- SBA Form 912, Statement of Personal History.
- SBA Form 413, Personal Financial Statement.
Your lender will be able to help you throughout the application process and should be able to answer any questions you may have.
The time it takes to get an SBA loan for your startup will vary largely based on your lender and loan program, but may be anywhere from 30 to 90 days.
Alternatives to SBA startup loans
If you don’t think an SBA loan is right for your startup, or simply want to look into other options, here are a few alternatives to consider:
- Online business loans. Online lenders typically have flexible qualification requirements and can offer a wide range of loan options for startups. These lenders can also provide fast business loans, sometimes funding applications in as little as 24 hours. This speed and flexibility will result in higher interest rates, however.
- Nonprofit and community lenders. Many nonprofit and community lenders provide microloans and other financing products outside of the SBA microloan program. These organizations focus on funding underserved businesses in their community and can be a good option for a variety of startups.
- Small-business grants. If you’re looking to avoid debt, startup business grants can offer capital that you don’t have to repay. Applying for grants can be time-consuming and competition is often difficult, but it may be worth it if you can secure funds.
- Business credit cards. For startups that are just launching, a business credit card can help you pay for everyday expenses. You can use a startup business credit card to build business credit and earn rewards, but you’ll want to make sure you don’t spend too much on the card and end up carrying a balance.
Frequently Asked Questions
Yes, you can get an SBA loan as a startup. The SBA microloan program is designed for startups and early-stage businesses, with startups receiving 25% of all microloans issued in fiscal year 2023, according to the SBA. Startups can qualify for other SBA loan programs, provided they have good personal credit and strong finances.
Generally, it’s harder for startups to get SBA loans than more established businesses. In most cases, SBA lenders will require that you have at least two years in business to qualify for financing. SBA microloans, however, are more accessible to startups, as they offer flexible qualification requirements.
The requirements for an SBA startup loan will vary based on your lender and the type of SBA loan you choose. In general, SBA microloans will have more flexible requirements than 7(a) or 504 loans.