SBA financing
SBA financing
The SBA does not lend you money. It backs part of a loan made by a bank or an SBA lender, which lets that lender say yes to businesses it might otherwise decline, and offer longer terms than it otherwise would. That trade — more paperwork and more time, in exchange for terms a conventional loan rarely matches — is the whole story of SBA lending.
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How SBA financing works
You apply to a lender, not to the government. The lender underwrites the loan on its own criteria and the SBA guarantees a portion of it. That guarantee is what changes the lender's appetite, and it is also why the process follows programme rules on top of the lender's own.
The programmes differ by purpose. 7(a) is the general-purpose one and covers the widest ground — buying a business, property you will occupy, equipment, working capital, sometimes several of those in a single loan. 504 pairs a bank loan with a fixed-rate loan from a Certified Development Company and is built for real estate and long-life equipment. Express trades a smaller maximum for a faster decision. CAPLines are built around working capital rather than a purchase.
The common thread is that you are expected to occupy and run the business. SBA financing is for operators, not for passive investors — a landlord buying a rental will not be looking at these programmes.
It is slower than a working-capital lender and asks for more documents than a bank line of credit. Where the extra weeks buy you a longer term and a payment you can actually carry, it is usually worth it. Where they do not, we will tell you that instead.
What lenders look at
Eligibility first
Size, industry, ownership and use of funds all have programme rules. We check these before anything else, because they are pass or fail.
Owner occupancy
For property, you are expected to occupy and operate. Investment property is a different conversation entirely.
Cash flow
Whether the business earns enough to carry the payment with room to spare. This is the heart of an SBA file.
Your experience
Industry experience carries real weight, particularly on an acquisition or a start-up.
Credit history
Personal and business, and unresolved government debt is its own blocker.
Your contribution
An injection from the buyer is expected. How much depends on the programme, the lender and the deal.
Collateral
Taken where available. A shortfall does not automatically end the file the way it would on a conventional loan.
The documents
These files are document-heavy. Being organised is worth more here than on any other product we arrange.
Questions we get asked
Does the SBA lend me the money?
No. A bank or SBA lender lends it; the SBA guarantees part of that loan. You apply to the lender, and the lender's credit decision is still the lender's.
What is the difference between 7(a) and 504?
7(a) is general purpose and can cover a business, property, equipment and working capital together. 504 pairs a bank loan with a fixed-rate CDC loan and is built for real estate and long-life equipment.
Can I use one to buy a business?
Yes — business acquisition is one of the most common uses of the 7(a), including buying a station, a store or a franchise.
Can I buy a rental property with an SBA loan?
No. These programmes are built around occupying and operating the business on the property. For investment property, DSCR and commercial lending are the routes.
How long does it take?
Longer than a working-capital loan and longer than most conventional files. The exact timeline depends on the lender, the programme and how fast documents arrive — which is the part you control.
Is there a personal guarantee?
Yes. Owners above the programme's ownership threshold are expected to guarantee.
What if I have been declined by a bank?
It is worth asking why. Sometimes an SBA programme is exactly the answer, and sometimes the reason for the decline applies here too. We would rather find out before you spend six weeks on it.
Who this page is for
- Buyers acquiring an existing business.
- Owners buying the building they operate from.
- Franchisees funding a new or second location.
- Established businesses needing longer terms than a short-term lender offers.
- Owners who were declined by a bank and were told to look at SBA.
What SBA financing covers
- Buying an existing business, including its goodwill.
- Owner-occupied commercial property.
- Equipment and long-life assets.
- Working capital and inventory.
- Construction, expansion or a build-out.
- Refinancing certain business debt, subject to programme rules.
The words you will hear, in plain English
SBA lending has more vocabulary than most products. These are the ones that come up in the first conversation.
- 7(a)
- The SBA's general-purpose programme. The widest range of uses, and the one most business purchases go through.
- 504
- A structure combining a bank loan with a fixed-rate loan from a Certified Development Company, for real estate and long-life equipment.
- CDC
- Certified Development Company — a non-profit that provides the SBA-backed portion of a 504 loan.
- SBA Express
- A faster route with a smaller maximum and a lower guarantee. Speed traded against size.
- CAPLines
- SBA programmes built around working capital and contracts rather than buying an asset.
- Guarantee
- The SBA's promise to cover part of the lender's loss. It is what makes a lender willing to lend, not money paid to you.
- Owner-occupied
- You run the business on the premises. A condition of the property programmes, not a preference.
- Equity injection
- The money you put in. Required, and where it comes from is checked — gifted or borrowed funds have their own rules.
- Preferred lender
- A lender authorised to make certain SBA decisions in-house, which can shorten the process.
- Standby agreement
- A document under which a seller note is subordinated. Common where part of a purchase price is left owing to the seller.
When each programme tends to fit
Illustrative situations, to show which programme usually suits which purpose. Not offers, not quotes, and not terms available to anyone in particular — eligibility, programme rules and figures vary by lender and by transaction.
Buying a business
An operator acquiring an existing store or station. A 7(a) can cover the business, some equipment and working capital in one loan, which is why it is the usual answer.
Buying the building you occupy
A business buying its own premises. A 504 puts the real estate on a long fixed-rate loan alongside a bank loan; a 7(a) can do it in one piece. Which is better depends on the size and the structure.
Working capital, not an asset
A contractor funding payroll and materials across long contracts. A CAPLines facility is built for that pattern, where a term loan is not.
When SBA is the wrong answer
A buyer who will not occupy the property, or a deadline three weeks out. SBA is not built for either, and a conventional or private lender is the honest recommendation.
What to prepare
SBA files are document-heavy, and the documents — not the lender — are usually what set the pace. Gathering these early is the single biggest thing you control.
- A completed application for each owner
- Business financial statements, usually three years
- Business tax returns for the same period
- Personal financial statement for each owner
- Personal tax returns
- Entity papers: articles, operating agreement, EIN letter
- Your resume or operating history
- The purchase agreement, where you are buying
- A business plan and projections, on an acquisition or start-up
- The lease, where you will occupy leased premises
- Proof of your equity injection and where it came from
- Licences and permits for the business
From enquiry to funding
- 1
Eligibility
Size, industry, ownership and use of funds against the programme rules. Pass or fail, so it comes first.
- 2
Which programme
7(a), 504, Express or CAPLines. The purpose of the money decides it, not your preference.
- 3
Matching a lender
SBA lenders differ sharply in what they like and how fast they move. This is where our team earns its keep.
- 4
The document package
The list above. Delays here are the most common reason SBA files run long, and they are the part you control.
- 5
Underwriting
The lender assesses the business, the cash flow, your experience and your contribution, then the SBA side of the file is processed.
- 6
Commitment and conditions
Terms in writing, with conditions to satisfy — appraisal, environmental, insurance, and often a landlord or seller document.
- 7
Closing and funding
Signing, funding, and the transfer of whatever comes with the business.
What goes wrong
Starting when the clock is already short
SBA is not a fast product. If you have a three-week deadline, ask about a bridge instead of hoping.
Sending documents in dribs and drabs
A half-complete package restarts the queue every time. Send it whole.
Unclear equity injection
Where your contribution came from is checked. Money that appeared last month without explanation becomes a problem.
Assuming any SBA lender is the same
They differ enormously by industry appetite and speed. The wrong one wastes a month.
Expecting it to buy a rental
These programmes are for operators. Investment property belongs on the DSCR or commercial path.
Unresolved government debt
Defaulted federal debt is a hard blocker. Deal with it before applying, not during.
Related financing
- SBA 7(a) →The general-purpose programme, in detail.
- SBA 504 →Real estate and long-life equipment at a long fixed rate.
- Business loans →When conventional terms fit better than the SBA process.
- Gas station purchases →One of the most common SBA uses we see.
- All business funding →Start from the question rather than the product.
Tell us about the business
What you are buying or funding, and what the business does today.
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This is not an offer and not an approval. Terms are set by a lender, in writing, after underwriting, and vary by lender, by property and by file.
See whether an SBA programme fits
Tell us the purpose of the money and a little about the business. If SBA is not the right route, we will say so before you spend six weeks on it.