SBA loan application: How to get an SBA loan

As a small business owner, you know that strong funding fuels growth, efficiency and opportunity. SBA loans, backed by the U.S. Small Business Administration (SBA), are a trusted way of accessing that capital.

If you're considering an SBA loan application, it's important to avoid common missteps and position your business for success. Learn how SBA loans work, how to choose a lender and what to expect during the application and approval processes.

What to know about SBA loan application

SBA loans and lines of credit are issued by lenders but partially guaranteed by the SBA. If the borrower defaults, the SBA repays part of the loan, reducing the lender's risk and making it easier for borrowers to secure favorable terms. Loan amounts vary from $500 to $5.5 million and may require collateral.

To qualify, your business must meet SBA's size standards, exist and operate in the U.S. and have a good credit score. You must also demonstrate that you couldn't secure financing with reasonable terms elsewhere.

Only for-profit businesses in eligible industries qualify. Ineligible businesses include those involved in lending, gambling, pyramid schemes or illegal activities.

Prepare your business before SBA loan application

Set yourself up for success by doing critical prep work before applying:

1. Clarify your financing goals: Know exactly how you'll use the funds and prepare to articulate that plan.
2. Assess your finances: Review revenue, expenses and debts to determine how much you'll borrow and where application weaknesses may exist.
3. Clean up your credit: Strong personal and business credit histories position you as a more attractive applicant.
4. Audit your business structure: Ensure your business meets all legal and regulatory requirements.
5. Plan for repayment: Identify which loan terms are feasible and prepare a repayment strategy you can present to lenders.

Choosing the right type of loan

The SBA offers three main categories of loans:

• 7(a) loans: The most common financing option, 7(a) loans provide up to $5 million for a variety of uses, including purchases of real estate, working capital, equipment, business acquisition and debt refinancing.
• 504 loans: Useful for long-term investments, 504 loans provide up to $5.5 million for fixed assets like real estate, buildings and large equipment.
• Microloans: Aimed primarily at new or very small businesses, microloans provide up to $50,000 for start-up capital, equipment, inventory and working capital.

Types of SBA lenders

A range of lenders work with small businesses through SBA programs:

• Traditional banks and credit unions: National or regional institutions, often with SBA-specific departments
• Certified Development Companies (CDCs): Nonprofits certified by the SBA to issue 504 loans
• Small Business Lending Companies (SBLCs): Non-bank lenders specializing in 7(a) loans for select industries
• Community Advantage SBLCs: Mission-driven nonprofits offering 7(a) loans to underserved and veteran-owned businesses
• Microlenders: Nonprofits offering microloans, often paired with training and support
• Online and non-bank lenders: Tech-enabled lenders with streamlined application and funding processes

Research potential lenders

Before applying, compare several lenders by gathering information about the following:

• Lender's experience, particularly in your industry
• Borrower reviews and approval rates
• Loan amounts and terms offered
• Eligibility criteria
• Accepted types of collateral
• Application timeline and process
• Support services for borrowers
• Restrictions on fund usage
• Options for loan modifications or renewals

How to apply for an SBA loan

Ready to start the SBA loan application process? Here's what you need to know.

Gather documents

Required documents for your application may include the following:

SBA forms:

• SBA Form 1919 (Borrower Information Form)
• SBA Form 413 (Personal Financial Statement)

Financial documentation:

• Current income statement and balance sheet
• Three years of income statements, balance sheets and federal income tax returns
• Cash flow projections
• Debt schedules
• Lender's credit memo
• Credit reports

Business details:

• Business plan
• Business valuation
• Owner resumes
• Organizational chart
• Loan use statement
• History of business loan applications

Legal and corporate documents:

• Business licenses, certificates, incorporation articles, franchise contracts, etc.
• Business insurance documentation
• Legal filings (lawsuits, legal judgments, bankruptcies, etc.)

Collateral and property documentation:

• Collateral list
• Purchase agreements
• Real estate appraisals

Loan submission process

Apply through your chosen SBA-approved lender, who will review your application materials against their criteria. If approved, the application is submitted to the SBA for final review. With SBA sign-off, the lender finalizes loan terms and disburses funds.

Expect the time between application and funding to take 30 to 90 days, though microloans may be funded within a week. On average, 34% of applications for SBA loans and lines of credit receive full approval.

Explore small business financing with Citizens

The right financing can open exciting new doors for your business. While the process can be complex, you don't have to navigate it alone. As a Preferred SBA Lender, Citizens offers expert guidance at every step so you can grow with confidence. Start your business financing journey today.

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