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Applying for an SBA Loan: The Good, The Bad, and The Not-so-pretty

Small Business Administration (SBA) loans

Applying for an SBA Loan: The Good, The Bad, and The Not-so-pretty

Updated: May 20th, 2021

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If you’re looking for small business funding, then you’ve undoubtedly come across SBA loans. SBA loans are one of the most popular funding options currently available for small business owners. If you were wondering how to qualify for an SBA loan, this article will explain what they are and give you a step-by-step process for how to apply. 

What is an SBA Loan?

The term “SBA loan” is somewhat of a misnomer because the Small Business Administration (SBA) doesn’t do any lending. Instead, an SBA loan is a small business loan that’s partially guaranteed by the SBA. 

If you qualify for an SBA loan, you can receive anywhere between $500 and $5.5 million to fund your business. The SBA backs up to 85% of small business loans for $150,000 or less, and 75% of loans higher than $150,000. 

If, for some reason, you’re unable to repay the loan, the SBA covers the portion they guaranteed. This benefit eliminates most of the risk for the participating lenders issuing these loans.  

Because the government backs SBA loans, the application process is notoriously tricky, and SBA loan requirements considered among the most strict. The application process can be lengthy and detailed, and you need to prepare for plenty of paperwork.

How to Qualify for an SBA Loan

It’s still possible to qualify for an SBA loan in any case. You need to make sure you follow the correct procedure and have patience. Listed below are the five steps you’ll take to get an SBA loan.   

How to Get an SBA Loan in 5 Steps

Step 1: Make sure you’re eligible based on the loan requirements

SBA loans are highly competitive. As such, you need to meet the following SBA loan requirements:

  • You have a U.S.-based, for-profit business in a relevant industry.
  • Your business meets the requirements to be considered a small business.
  • You have been in business for at least two years.
  • You’ve invested equity in your business. 
  • You’ve exhausted all other funding options.

Step 2: Choose a loan program that’s right for your needs

The SBA offers multiple loan programs. The next step in qualifying for an SBA loan is deciding on the one that’s right for your business. The SBA does provide different programs; here is a quick overview:

  • SBA 7(a): This is a standard SBA loan of up to $5 million. These loans can be used for any legitimate business purpose.  
  • Disaster programs: These loans are for businesses recovering from natural disasters. 
  • SBA 504: These loans enable businesses looking to buy real estate or equipment to expand. You’ll apply for this type of loan through a Certified Development Company (CDC).
  • SBA export programs: This loan program is designed for export companies that are having a hard time securing business financing. 

Step 3: Compare SBA lenders

Now that you know you meet the SBA loan requirements and you’ve chosen a program, it’s time to find an SBA lender. The lender will set the rates, credit requirements, and determine whether or not your business qualifies for a loan.

It’s crucial to find the right lender specifically for you and your business needs. Start researching banks, direct lenders, or loan brokers. Make sure you understand that lender’s small business loan terms before agreeing to anything. 

Step 4: Gather your paperwork ahead of time to make it easier to qualify for an SBA loan

It’s a good idea to gather your paperwork before you begin applying for the loan. The application process is extensive, so you want to make sure you have all your ducks in a row. 

The following is a list of the documents you’ll need to have on hand when you apply to get an SBA loan:

  • Your business plan
  • Your resume
  • A cash flow statement
  • At least two years of personal tax returns
  • At least two years of business tax returns
  • Your business licenses
  • Proof of ownership
  • A profit and loss statement
  • A detailed explanation of how you plan to use the funds

Step 5: Fill out the application to get an SBA loan

Now you’re ready to take the final step. You know everything you need to know regarding how to qualify for an SBA loan, and now it’s time to fill out the application. The application itself will vary depending on the lender you choose. Several forms will also need to be completed, like a Personal Finance Statement, or an SBA 7(a) Borrower Information Form.  


SBA loans are highly competitive and can be a challenge to get qualified. Additionally, SBA loan requirements are notoriously difficult to achieve. But if you can meet the criteria, they are worth the effort. Make sure you partner with a lender that is familiar with SBA lending and can walk you through the process.

Learn more about SBA processing times here.

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