<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=690758617926394&amp;ev=PageView&amp;noscript=1">
The Complete Payroll Blog

How to apply for an SBA loan

Posted by Complete Payroll | Sep 27, 2017 6:58:00 AM

How to apply for an SBA loan.png

Since 1953, the Small Business Administration (part of the Department of Commerce) has helped entrepreneurs get capital to start and expand their businesses. The SBA doesn't make grants to businesses, but rather provides loan guarantees to encourage participating banks to make loans to small businesses.


The SBA can be an attractive source for capital. However, as with many government programs, the process is not easy. There are numerous requirements for applying for a SBA loan, and if you get one there are some additional reporting requirements. If you are considering applying for a SBA loan, be sure to plan for at least 12 to 18 months for the process. Proper documentation and properly completed applications can shorten the process somewhat. Working with a bank or other lender that is familiar with the SBA process can also make the process easier.

The 7(a) loan

The most common form of SBA loan is a 7(a) guaranteed loan, with the loan made by a private lender (often a bank) and the SBA providing a guarantee on 75% of the amount of the loan. There are some maximize business size restrictions on these loans. For example, a retail or service company could have at least $6 million in sales (and perhaps up to $29 million) and still be eligible. A wholesaler can have up to 100 employees and still qualify.

Interest rates and maximum guarantees

The maximum the SBA will guarantee is $1,500,000 and therefore the maximum amount of the loan is $2 million. The interest rate on SBA 7(a) loans is tied to the prime rate. For fixed rate loans of $50,000 or more and with a term of 7 years or more the rate can be up to 2.75% above prime. For loans shorter than 7 years, the rate can be up to 2.25% above prime.

While there are some restrictions on the use of loan proceeds, such as floor plan financing, payments to owners, paying delinquent withholding taxes or other "imprudent" uses, generally proceeds can be used in the normal course of business.

Allowable uses of loan proceeds:

  • Purchase real estate to house the business
  • Construction, renovation or leasehold improvements
  • Acquisition of furniture, fixtures and equipment
  • Purchase of inventory
  • Working capital 

Click here to ask our tax department a question.

Steps for applying for an SBA loan

Applying for a SBA loan requires completing various documents and may require collateral or personal guarantees. Lenders may also charge some origination fees. 

1. Determine your eligibility.

The first step in applying for an SBA loan is to determine whether or not your business is eligible. You’ll typically need to meet both general borrower requirements and SBA eligibility requirements.

SBA Loan Requirements:

  • 680+ FICO score for all primary business owners. There are many places you can check your score online.
  • Down payment of 10% or more if you’re using the loan proceeds to purchase a business or commercial real estate.
  • SBA loans don’t need to be 100% collateralized, but the more business and/or personal collateral you bring to the table the easier it will be to get your loan approved.
  • 2+ years in business. Startups can get SBA 7a loans, but it is more difficult. If you want to try for an SBA loan as a startup, you’ll need to have all of the above plus business management & industry experience.
  • Business is profitable.
  • No delinquencies or defaults on debt obligations to the U.S. government (including student loans).
  • Commercial real estate loans must be 51%+ owner-occupied.

SBA 7a Loan Program Requirements:

2. Find an SBA loan provider.

If you meet the requirements above, the next step in applying for an SBA loan is to find an SBA loan provider that will disburse and service your loan. Finding an SBA loan provider will mean reaching out to banks and other direct lenders and brokers. 

Here is the list of the SBA's 100 most active lenders.

3. Get your paperwork together.

Once you've got a lender (or broker), you should start putting together all the documents you need to formally submit your application. If you click here, you can review a checklist provided by the SBA. Here are the main documents required...

  • Loan Request Amount & Detailed Allocation of Funds
  • Business Financials
  • YTD Profit and Loss (P&L) Statement
  • YTD Balance Sheet
  • Projected Financials (1-3 years)
  • Proof of Ownership
  • Business Certificate/License
  • Loan Application History
  • Business Tax Returns (last 2 years)
  • Personal Tax Returns (last 2 years)
  • Personal Financial Statement
  • Owner Résumés
  • Business Overview and History
  • Business Lease

4. Complete SBA forms.

You will need to fill out some SBA forms before your loan can be approved. 

Once you've completed all of your SBA forms and get all your paperwork together, you can meet with your bank to finalize your loan application.


SBA loans can be a useful source of needed capital for many small businesses. However, as with many government programs, there are additional paperwork (often bureaucratic) issues to deal with as part of the process. Interest rates are a couple percentage points over prime and repayment terms can be negotiated.

If you are considering a SBA loan, be prepared to spend some time and effort. Being well organized, having patience and working with an experienced SBA lender can make the process less burdensome. 

New Call-to-action

Topics: Taxes, Labor law, Benefits

Written by Complete Payroll

We do payroll, HR, timekeeping and more for employers all over the country from a small, rural town in Upstate New York. And we're constantly publishing articles and other resources to help business owners, HR managers or anyone that helps manage a workforce. Welcome to Payroll Country!

Related Articles

Are you using our free resources?

We're constantly publishing free tools to help with payroll, HR and other administrative objectives.

New call-to-action
New Call-to-action

Subscribe to instant blog email notifications

Recent Posts

General Disclaimer

The materials and information available at this website and included in this blog are for informational purposes only, are not intended for the purpose of providing legal advice, and may not be relied upon as legal advice.  The employees of Complete Payroll are not licensed attorneys. This information and all of the information contained on this website are provided pursuant to and in compliance with federal and state statutes. It does not encompass other regulations that may exist, including, but not limited to, local ordinances. Complete Payroll makes no representations as to the accuracy, completeness, currentness, suitability, or validity of the information on this website and does not adopt any information contained on this website as its own. All information is provided on an as-is basis.  Please consult an attorney to obtain advice with respect to any particular question or issue.