Government Small-Business Loans: Top Options for Funding
Government Small-Business Loans: Top Options for Funding
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SBA 7(a) loan
Best for overall government small-business loans
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
SBA 7(a) loan
Best for overall government small-business loans
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
SBA Express loan
Best for fast financing
Max loan amount
$500,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Can choose between term loan and line of credit.
- Competitive interest rates and long repayment terms.
- Faster turnaround times than other SBA loans.
- Government guarantee makes it somewhat easier to qualify compared to conventional business bank loans.
Cons
- Loan amounts max out at $500,000.
- Can still be difficult to meet minimum eligibility requirements.
- May still take a total of 30 days or more to receive funding.
SBA Express loan
Best for fast financing
Max loan amount
$500,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Can choose between term loan and line of credit.
- Competitive interest rates and long repayment terms.
- Faster turnaround times than other SBA loans.
- Government guarantee makes it somewhat easier to qualify compared to conventional business bank loans.
Cons
- Loan amounts max out at $500,000.
- Can still be difficult to meet minimum eligibility requirements.
- May still take a total of 30 days or more to receive funding.
SBA microloan
Best for startups or bad credit
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
SBA microloan
Best for startups or bad credit
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
SBA CAPLines of credit
Best for lines of credit
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Line of credit options for seasonal, working capital, building and contracting needs.
- Large maximum borrowing amounts.
- Competitive interest rates and repayment terms.
Cons
- Typically requires good credit and multiple years in business.
- Slow to fund.
- Collateral and/or down payment may be required.
SBA CAPLines of credit
Best for lines of credit
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Line of credit options for seasonal, working capital, building and contracting needs.
- Large maximum borrowing amounts.
- Competitive interest rates and repayment terms.
Cons
- Typically requires good credit and multiple years in business.
- Slow to fund.
- Collateral and/or down payment may be required.
SBA CDC/504 loan
Best for real estate
Max loan amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
SBA CDC/504 loan
Best for real estate
Max loan amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
SBA Economic Injury Disaster Loan
Best for government loans after a disaster
Max loan amount
$2,000,000
Min. credit score
Undisclosed
Pros
- Large loan amounts and long repayment terms.
- Interest rates max out at 4%.
- No prepayment penalties.
Cons
- Collateral required for loans over $25,000.
- Only available for businesses located in a declared disaster area.
- Can be slow to fund.
SBA Economic Injury Disaster Loan
Best for government loans after a disaster
Max loan amount
$2,000,000
Min. credit score
Undisclosed
Pros
- Large loan amounts and long repayment terms.
- Interest rates max out at 4%.
- No prepayment penalties.
Cons
- Collateral required for loans over $25,000.
- Only available for businesses located in a declared disaster area.
- Can be slow to fund.
With a traditional business loan, you apply for financing and if approved, repay your lender over time. Government business loans are similar, except the government provides your lender with a guarantee on your loan.
This guarantee means that if you default on the loan, the government will pay back your lender for the money they lost. The government’s guarantee reduces the risk for lenders and incentivizes them to offer small-business loans with competitive interest rates and flexible terms — usually for small-business owners who wouldn’t qualify for such terms on their own.
Because of those benefits, however, government small-business loans often have strict qualifications and a lengthy application process. But if you can qualify, they’re a great option to fund or grow a company.
Perhaps the most well-known type of government business loan, SBA loans are issued by banks and other approved lenders and partially guaranteed by the U.S. Small Business Administration. SBA loans typically have low interest rates and long terms, but can be difficult to qualify for.
There are several SBA loan options to choose from:
SBA 7(a) loans
The 7(a) program is the primary type of SBA loan, with more than $31 billion in loans issued in fiscal year 2024. 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 lines 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 several days, whereas a 7(a) loan application may take weeks or months to process.
SBA CAPLines
Short for “capital lines of credit,” SBA CAPLines offer eligible small-business owners lines of credit to help with short-term gaps in cash flow. Lines of credit work similarly to credit cards: you take out money on an as-needed basis up to a specific limit. CAPLines can be used to finance seasonally high inventory or labor costs, build or rehabilitate property, cover expenses related to carrying out a contract or serve as general working capital.
For a more flexible SBA line of credit, check out the new SBA Working Capital Pilot program.
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. According to the U.S. Small Business Administration, the average microloan amount for the 2024 fiscal year was about $16,100.
SBA Disaster loans
SBA disaster loans offer financing to small businesses that have experienced and suffered damage from a declared disaster. These loans are issued directly by the SBA and are available in amounts up to $2 million.
Disaster loan options include:
Economic Injury Disaster Loan (EIDL)
EIDLs provide working capital to businesses that have suffered economic damage due to a disaster. This funding is available to help them resume normal operations.
Business physical disaster loan
This financing can help you repair or replace damaged real estate, equipment, machinery or other physical assets.
Mitigation assistance
In addition to loan funds, the SBA offers mitigation assistance, which can increase your physical disaster financing by up to 20% to help you make upgrades so your property is more resilient in the future.
Military Reservist Economic Injury Disaster Loan (MREIDL)
These loans are available to help businesses that have suffered economically as a result of a key employee being called up to active military duty.
USDA business loan programs
The U.S. Department of Agriculture provides a partial guarantee to lenders (banks, credit unions and other financial institutions) that issue loans to small businesses in rural areas (typically populations of 50,000 residents or fewer). Businesses in these areas can use the financing for a variety of purposes, including growth and development, machinery and equipment purchases, real estate purchases and debt refinancing.
Some of these loan programs include:
- Business & Industry Loan Program. Offers loans to business owners located in a rural area with 50,000 or fewer residents.
- Rural Microentrepreneur Assistance Program. Offers loans up to $50,000 to rural businesses with 10 or fewer full-time employees.
- Rural Economic Development Loan Program. Offers loans to fund projects that will create or retain rural jobs.
State and local government small-business loans
Many state and local governments offer financing options for small businesses. New York, for example, offers lending resources for small businesses through its Empire State Development Division and by backing private sector CDFIs and lenders. It is also still offering some pandemic recovery programs.
You can browse government-backed loans in your state, by visiting your Secretary of State or Department of Economic Development website. You can also try getting in touch with the National Association of Government Guaranteed Lenders (NAGGL) closest to you. For instance, the North Texas branch, or NTAGGL, has a list of member organizations and their contact information on its website.
Federal and state governments also provide nonlending initiatives that promote business growth. Here are some options to consider:
- 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 in turn invest in small businesses in exchange for a share of ownership. 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.
On Reddit’s r/smallbusiness subreddit, users frequently post questions and personal experiences regarding SBA loans. We selected a couple of questions to answer here.
What's the SBA loan process like?
In one Reddit thread, a user expressed concerns over the potential difficulty of getting an SBA loan, saying they’ve heard from others that the process isn’t easy.
Reddit’s take
Many Redditors felt that, based on their own experiences, the SBA loan process isn’t too bad. One user compared it to getting a personal mortgage. Redditors shared that it can involve lots of paperwork and take several months, but that ultimately it’s worth it if you can qualify. Redditors also recommend working with an SBA preferred lender to help the process move along more smoothly.
NerdWallet’s take
There are multiple types of SBA loans that each have varying turnaround times, but for most SBA loans, you can expect to receive funding anywhere between one to three months. It is possible to find lenders with faster processing times. For example, BayFirst Financial offers an SBA 7(a) loan in a matter of days through its SBA Bolt loan program.
Ultimately, how fast and how smooth the process flows depends a lot on your lender and how quickly you can supply the required paperwork. As noted by users, working with a preferred lender can help speed up the process.
How do you find a good SBA lender?
A user asked Reddit for advice on what to look out for when evaluating SBA lenders.
Reddit’s take
A few Redditors advised going with a local lender that the original poster feels comfortable working with. Another Redditor echoed a similar sentiment, but cautioned that local lenders may be more conservative in who they lend money to, and that some may lack robust experience with SBA loans. This user recommended finding an SBA preferred lender that seems to have a genuine interest in the original poster’s success and a loan officer that takes time to listen and understand their unique situation.
NerdWallet’s take
Working with an SBA preferred lender can go a long way in ensuring a positive SBA loan application experience. Preferred lenders are vetted by the U.S. Small Business Administration to have deep knowledge and experience processing and servicing SBA loans. You can use the SBA’s 7(a) & 504 Lender Report to find lenders in your state with the most SBA loan approvals and amounts across different types of SBA loans. We also recommend reaching out to a bank you have an existing business banking relationship with and/or community banks in your area.
1. Decide how much funding you need
Consider how much funding you need and how you’re going to use it. Some government loans, like SBA 504 loans, can only be used for specific purposes, so it’s important to understand your borrowing needs at the beginning of the process.
You should also consider how much debt you can afford. For SBA financing, an SBA loan calculator can help you estimate payments and interest costs.
2. Evaluate your qualifications
Government loans typically have strict business loan requirements. You’ll likely need good credit, strong finances and multiple years in business to qualify.
You may also have to meet criteria specific to the type of loan you choose. SBA loans, for example, require that you:
- Qualify as a small business based on size standards.
- Be a for-profit business operating in the U.S.
- Have exhausted other financing options.
- Can show your ability to repay the loan.
» MORE: How to qualify for an SBA loan
3. Research and compare lenders
Unless you’re applying for an SBA disaster loan, you’ll be getting funding from a third-party lender, like a bank or credit union. If you already have an existing relationship with a financial institution, you might start your search by seeing if that lender offers SBA or USDA loans.
🤓 Nerdy Tip
To find other potential lenders, use the lender match tool on the SBA website. The SBA also maintains a list of current intermediaries participating in its microloan program.4. Gather your documentation and apply
Government business loans generally require a lengthy application process with extensive documentation. You may be required to provide:
- Business and personal bank statements.
- Business financial statements, such as income statements, balance sheets and cash flow projections.
- Business and personal Income tax returns.
- Detailed schedule of collateral.
- Existing debt schedule, if applicable.
- Business certificates or licenses.
- Loan application history.
- Resumes for each business owner.
- Business overview and history.
- Business lease.
SBA loans also require specific forms for your personal financial statement, borrower information, statement of personal history and personal guarantee.
Your lender should be available to guide you through the process and answer any questions you may have.
5. Wait for approval and sign loan agreement
It may take anywhere from a few weeks to a few months to receive approval and funding from a government business loan. Once you’ve been approved, however, your lender will send you a business loan agreement.
You should read over this contract thoroughly and follow up with your lender if you have any questions or concerns. It can also be helpful to have a business attorney look over the agreement as well.
Government small-business loans are a strong choice for eligible borrowers. But a different type of business loan may be a better fit depending on your business’s qualifications and needs. Here are some alternatives to consider:
- Bank business loans. If you’re a highly qualified borrower with 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.
- Online business loans. 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.
- Business credit cards. Although some SBA loans are available to startups, it may still be difficult to qualify if you don’t have strong finances or can’t provide collateral. If your company is just getting started, a business credit card may be more useful to help you pay for everyday expenses — plus, earn rewards.
- Personal loans. If you need to make a bigger purchase and have strong credit, you might consider a personal loan for your new business. It’s important to keep in mind, however, that your personal finances will be at risk if you can’t repay.
NerdWallet Assigning Editor Ryan Lane contributed to this article.
Last updated on February 28, 2025
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Read more about our ratings methodology for small-business loans and our editorial guidelines.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
See Your Loan Options
Frequently Asked Questions
The U.S. Small Business Administration only lends directly to businesses that have been impacted by disasters. Otherwise, the SBA and Department of Agriculture partially guarantee loans that banks and financial institutions make to small-business owners. These loans typically have longer terms and lower interest rates than any other kind of financing.
The government doesn’t typically offer loans for you to launch a new business. For startups that are already operational, however, SBA microloans will likely be the best government-backed business loan option.
Most government business loans require that you have good to excellent personal credit. SBA Microloans and USDA rural business loans may be available to business owners with fair or poor credit, however. These programs are designed to provide funding to traditionally underserved communities and tend to have less stringent qualification requirements.