Funding options
SBA loan
The SBA does not lend. It guarantees part of a loan a bank makes, which is why the bank will lend longer and cheaper than it otherwise would. The trade is time and paperwork.
About two minutes. No credit pull to start. Free to you. Funding partners pay Addy for the introduction. Not an offer or an approval.
- How it is priced
- Interest set off a benchmark rate plus a spread the program caps, plus an SBA guarantee fee. Usually the lowest rate on this shelf.
- How you repay
- Monthly payments over a long term, commonly up to ten years for working capital and longer for real estate.
- What owners use it for
- Buying a business or a building, a large expansion, refinancing expensive debt, a big working-capital cushion.
Amounts, rates and terms come from the funding partner and depend on what your file shows. I do not set them, and I cannot promise them.
What it is
The plain version.
An SBA loan is a bank loan with a federal guarantee behind part of it. The U.S. Small Business Administration promises the lender it will cover a share of the loss if you default, and in return the lender accepts a longer term and a lower rate than it would on its own paper. The most common program is the 7(a); the 504 is for real estate and heavy equipment.
Because a bank is underwriting a long loan, the file is the longest of any shape here: tax returns, financials, a use of funds, often a business plan, and a personal guarantee from every owner above a threshold. Expect weeks at least, often months, from application to money.
The guarantee fee is real money, charged as a percentage of the guaranteed portion and usually rolled into the loan. Ask for the total cost with the fee included, not the rate alone.
What the money costs
- You borrow
- $150,000
- Illustrative rate
- 10.5% a year
- Repaid over
- 120 monthly payments
- Monthly payment
- about $2,024
- Interest paid
- about $92,900
Illustration only, not a quote. SBA rates are set off a benchmark plus a capped spread, and a guarantee fee is added; the lender states both.
Ten years of interest adds up even at a low rate. The same $150,000 over three years at the term-loan rate above would cost about $29,400 in interest but need about $4,982 a month instead of $2,024. Cheap per month or cheap in total: the question is which your cash flow can carry.
How it works
Four steps, and the one that surprises people is the last.
- 1
You assemble the file
Tax returns, financials, a use of funds, sometimes a plan. Longer than anything else on this site, and the part most people underestimate.
- 2
A lender underwrites it under SBA rules
The lender decides. The SBA sets the rules, caps the spread and guarantees part of the loan; it does not read your file.
- 3
The money lands, less the fee
The guarantee fee is usually taken from the proceeds or rolled into the balance. Ask which.
- 4
You pay monthly, for years
A low payment for a long time. Whether that is a good trade depends on what the money buys and how long it earns.
What partners may read
What a funding partner may look at.
- Two or more years of tax returns, business and personal
- Financial statements, and whether they agree with the bank account
- The owner’s personal credit, and every owner’s guarantee
- Collateral available, though the guarantee means it is not always required
- The use of funds, stated plainly
- The industry, and whether the program allows it
My read of what underwriting tends to weigh, not a list anyone published and not a test I score. Every partner sets its own criteria and none has told me what they are. Partners underwrite and decide; my job is to make the request readable so the answer comes back either way.
When it fits
- The need is months away, not this month
- You are buying something big and long-lived: a business, a building, a major expansion
- The cheapest total cost matters more than speed
- You have the records: returns, financials, an EIN, a business bank account
When it is the wrong tool
- You need money this month. Nothing about this shape is fast
- The business is under two years old with thin records. The program allows it; most lenders find the file too thin
- The amount is small enough that the paperwork outweighs the saving
- You are covering a shortfall. A ten-year loan to fix a bad quarter is a long time to carry a bad quarter
Questions
The ones owners actually ask.
Still stuck? The guides go further:
How does an SBA loan work?
A bank or approved lender makes the loan; the U.S. Small Business Administration guarantees part of it, which is what lets the lender go longer and cheaper than it otherwise would. You assemble a full file, the lender underwrites it under the program’s rules and decides, the guarantee fee is usually rolled into the balance, and you repay monthly over a long term. The SBA does not read your file and does not lend the money. Put a long term through the calculator.
Does the SBA lend the money?
No. A bank or an approved lender lends it. The SBA guarantees part of the loan, which is what makes the lender willing to go longer and cheaper. Your application goes to the lender, and the lender decides.
How long does it take?
Longer than anything else here, and the lender’s call. What I can say is what makes it slower: missing tax returns, a use of funds nobody can follow, and a file that does not match the bank account.
What is the guarantee fee?
A fee the SBA charges the lender for the guarantee, which the lender passes on to you, as a percentage of the guaranteed part of the loan. It is usually rolled into the balance. Ask for the total cost with it included.
Can I get one under two years in business?
Sometimes, and it is harder. The program allows it; the lender decides, and a thin file is a thin file. A line or an advance is usually the earlier shape. Ask for the SBA loan when the returns exist.
Will applying pull my credit?
Not with me. The form on this page is information, not an application, and I do not run credit. A lender underwriting an SBA loan will run credit on every owner, and it will tell you when it does.
Do I need an EIN?
Yes, and a business bank account, and tax returns filed under them. This is the shape where the paperwork is the product. I wrote a short guide on getting the number.
Get funding options
Tell me about the business.
One form covers every shape on the shelf. Tell me about the business and roughly how much you're after; partners who work with businesses like yours take it from there. About two minutes, no credit pull from me.