Government Small-Business Loans: SBA Loans and Top Options

Federal government small-business loans

• SBA 7(a) loans. The 7(a) program is the primary type of SBA loan, with $36.5 billion in loans issued in fiscal year 2021, according to the Congressional Research Service. You can receive up to $5 million in funding for day-to-day expenses like payroll, as well as longer-term business costs like equipment financing. Funds are available as term loans or an SBA line of credit.
• SBA Express loans. A variation of the 7(a) program, Express loans come with a smaller funding maximum, $500,000, but offer quicker processing. If you need a fast business loan, you may be able to get approved for an SBA Express loan within a few days, whereas a 7(a) loan application may take weeks or months to process.
• SBA CDC/504 loans. These SBA loans also offer funding of up to $5 million; however, CDC/504 loans have strict usage rules compared with other government small-business loans. Their primary use is financing construction or real estate projects. Unlike 7(a) loans, you can’t use an SBA CDC/504 loan for working capital or refinancing debt.
• SBA Microloans. The SBA offers microloans of up to $50,000 through nonprofit community organizations. Microlenders often focus on assisting traditionally underserved populations, including minority business owners and women business owners, and may have looser eligibility requirements than other government-backed business loans. SBA Microloans can be good options for newer businesses or those with bad credit.

State and local government small-business loans

• Paycheck Protection Program loans. The Paycheck Protection Program officially ended on May 31, 2021. If you received a loan prior to the closing period and haven’t heard from your lender regarding PPP forgiveness, you should reach out to them to initiate the process.
• Economic Injury Disaster Loans. As of January 1, 2022, the SBA is no longer accepting new applications for COVID-19 EIDL loans. You can submit a request six months from the date of decline for reconsiderations and 30 days from the date of decline for appeals, unless funding is no longer available. The period to apply for the $10,000 EIDL advance, or grant, has also expired.
• State and local COVID-19 relief. Some states and local governments are still offering small-business financing programs that are specific to COVID-19 relief. You can visit official government websites in your area to see what options may be available for your business.

• Small-business grants. Federal, state and local governments offer a range of grant programs that provide free financing to small businesses. Grants.gov is a good resource for researching small-business grants administered by federal government agencies.
• Small Business Investment Companies. The SBA funds and licenses SBICs, which offer small businesses debt and equity. You can find an investor in your area on the SBA’s website.
• SBA contracting assistance programs. These programs, like the SBA 8(a) program, help small businesses win federal contracts.

• If you’re a highly qualified borrower. If you have excellent credit, many years in business and strong revenue, you may want to look at bank small-business loans before government options. Banks typically offer the lowest rates on business loans, whereas SBA loan rates have set ranges based on rules established by the federal government.
• If you’re in a rush. Getting a government small-business loan requires approvals from a lender and the agency providing the guarantee, which can be time-consuming. Consider an online lender if you can’t afford to wait. Some offer funding as quickly as the same or next day. However, that convenience will likely mean a higher interest rate.
• If you’re just getting started. Businesses that haven’t been around for at least two years and lack strong financials won’t be able to get most government loans, though lenders set their own qualifications. Until your company is more mature, you’ll need to turn to startup business loan options such as credit cards or personal loans.