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Here are 4 government small-business loans
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
SBA 7(a) loan with Fundera by NerdWallet | Best for Overall government small-business loans | $5,000,000 | 650 | with Fundera by NerdWallet |
SBA Express loan with Fundera by NerdWallet | Best for Fast government small-business loans | $500,000 | 650 | with Fundera by NerdWallet |
SBA Microloan with Fundera by NerdWallet | Best for Government small-business loans for bad credit + Government loans to start a business | $50,000 | 620 | with Fundera by NerdWallet |
SBA CDC/504 loan | Best for Government small-business loans for real estate | $5,000,000 | 680 | |
Here are 4 government small-business loans
Best for Overall government small-business loans
Best for Fast government small-business loans
Best for Government small-business loans for bad credit + Government loans to start a business
Best for Government small-business loans for real estate
U.S. Small Business Administration
Max Amount
$5,000,000
Min. Credit Score
680
I'M INTERESTED IN:
Our pick for
Overall government small-business loans
SBA 7(a) loans are the most common government small-business loan, offering financing for equipment, working capital, refinancing debt or other business purposes.
SBA 7(a) loan
with Fundera by NerdWallet
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
11.50-15.00%
with Fundera by NerdWallet
Our pick for
Fast government small-business loans
SBA Express loans offer up to $500,000 and can fund faster than other SBA loan options.
SBA Express loan
with Fundera by NerdWallet
Max Loan Amount
$500,000
Min. credit score
650
Est. APR
11.50-15.00%
SBA Express loans are available in amounts up to $500,000 as either a term loan or line of credit. These loans typically fund faster than standard 7(a) loans.
Max loan
$500,000
Min. Credit score
650
Apr range
11.50-15.00%
with Fundera by NerdWallet
Our pick for
Government small-business loans for bad credit
Microloans are offered through nonprofit, community-based organizations, which may be more willing to work with you if you have low or poor credit.
SBA Microloan
with Fundera by NerdWallet
Max Loan Amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
SBA microloans are small-sized loans funded by the U.S. Small Business Administration and issued through approved intermediaries, typically nonprofit and community lenders.
Max loan
$50,000
Min. Credit score
620
Apr range
8.00-13.00%
with Fundera by NerdWallet
Our pick for
Government loans to start a business
Most lenders will require at least two years in business to get a government-backed loan. However, microloans of up to $50,000 may be available to newer businesses.
SBA Microloan
with Fundera by NerdWallet
Max Loan Amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
SBA microloans are small-sized loans funded by the U.S. Small Business Administration and issued through approved intermediaries, typically nonprofit and community lenders.
Max loan
$50,000
Min. Credit score
620
Apr range
8.00-13.00%
with Fundera by NerdWallet
Our pick for
Government small-business loans for real estate
SBA CDC/504 loans offer low-cost, long-term financing that you can use to purchase, renovate or construct buildings and facilities.
SBA CDC/504 loan
Max Loan Amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
SBA 504 loans are designed to promote business growth and job creation through the purchase or upgrade of major fixed assets.
Max loan
$5,000,000
Min. Credit score
680
Apr range
5.00-7.00%
Government business loans vs. traditional business loans
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 were to default on the loan, the government would 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 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.
Types of government small-business loans
SBA loans
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 $27.5 billion in loans issued in fiscal year 2023, according to the SBA. 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 several 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.
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.
The SBA also offers disaster assistance to homeowners and renters who experience damage to their primary residence.
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 business owners located in a rural area 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.
Additional government funding for small businesses
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 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.
How to get a government business loan
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.
To find other potential lenders, you can 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.
Alternatives to government small-business loans
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.
Find the right business loan
The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on March 15, 2024
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.
Our star ratings award points to lenders that offer small-business friendly features, including: transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to business credit bureaus and responsible lending practices. We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. 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.
Learn more
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 your 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.
