How to Apply for an SBA Loan in 4 Steps

If you need funding to take your business to the next level, it’s a good idea to consider SBA loans first. Individual lenders offer these small-business-friendly loans in partnership with the Small Business Administration, which guarantees a portion of your loan so that your lender can offer you a lower rate.

Business owners often avoid SBA loans because they have a reputation as being difficult to get. But while it’s true that it may require a bit more work than other loans, the benefits almost always outweigh the costs. Planning ahead so you have everything you need for each of the five steps to apply can make the process simpler.

1. Find a lender

Only lenders who partner with the SBA can offer SBA loans. To find a lender:

What to look for in a lender

Here are a few things to consider when looking for a lender:

2. Choose your loan type

When people say “SBA loans,” they’re typically referring to 7(a) loans, which are the SBA’s primary loan program. They can be used for most business purposes, including working capital.

There are also 504 loans, which provide small businesses with long-term financing for acquiring fixed assets that are used for expansion or modernization. The loans are available through Certified Development Companies (CDCs), a specific type of economic development nonprofit.

Additionally, the SBA offers microloans up to $50,000 for small businesses and nonprofit child care centers with smaller financial needs. The SBA also offers Economic Injury Disaster Loans (EIDLs) for those in a government-declared disaster area. During the COVID-19 pandemic, it also offered special EIDLs and Paycheck Protection Program (PPP) loans, although those programs are no longer accepting applications.

SBA loans include:

SBA loans vs. traditional loans

Traditional banks and non-traditional lenders alike may offer SBA loans and regular, non-SBA small business loans. In general, SBA loans tend to be more business friendly, offering cheaper rates with smaller down payments and less need for collateral. However, they do take longer to get and have a higher denial rate than traditional business loans, which are often quicker to receive but more expensive overall.

3. Check if you qualify

SBA loan requirements can vary depending on the loan program you select and the lender you apply with. However, some eligibility requirements are standard for all SBA loan applicants:

Keep in mind that the SBA loan requirements are a little different for each program. For example, SBA’s 504 loans can’t be used for working capital, and its microloans can’t be used for real estate purchases. So make sure you apply for the loan that matches up with your financing needs.

4. Gather your documents

What your lender requires for your application package can vary depending on the program type, but it’s often quite extensive and can easily take a few weeks to compile.

Your lender will let you know more specifically what’s needed from you, but these documents are usually required for 7(a) loans, according to the SBA:

If you’re not sure what’s needed or you’re having trouble putting together your application, ask your SBA loan officer for help.

5. Apply for your loan

Once you have everything ready, you’ll submit your application to the lender. They may follow up with questions or requests for additional documents as they process your loan application. They then begin the initial underwriting process to review your application and decide whether to proceed.

If they decide to move your request along, after a week or two, you will receive a document called a “loan proposal” or “letter of intent.” The document outlines your request and the loan’s terms, plus information on any required deposits or fees and closing details.

If you accept the loan proposal and sign it, the lender starts a more formal underwriting process. In most cases, the lender and the SBA thoroughly analyze your application, credit history and the documentation you provided.

If the SBA and lender approve your application, they’ll notify you and send a “commitment letter.” You must accept it if you want to proceed. You’ll receive closing documents, and your lender will guide you through the closing process. Once you sign these final loan documents, the loan is closed and the money is disbursed.

How long does it take to get an SBA loan?

All in all, SBA loans can take one to three months from beginning to end, though the timeline can vary depending on how organized your application is, who you’re applying with and what type of loan it is. When you apply for an SBA Express loan, it’ll tend to be on the shorter end of that spectrum. The same is true if you apply for an SBA 7(a) loan through an SBA Preferred Lender. For example, Citizens Bank is a Preferred Lender and claims it typically takes 45 days to close an SBA loan.

How to improve your chances of approval

There are many things you can do to ensure your business gets the funding it needs through the SBA loan program. It’s easier to break these down into two different groups: short-term strategies if you need funding now and long-term strategies if you have the option of waiting a bit to work on your creditworthiness.

If you need funding now:

If you have time to focus on long-term strategies:

Options if you’re rejected

According to Fed Small Business, about one-third of SBA loan applicants were fully approved in 2023, whereas a quarter of SBA loans were partially approved, and 42% of SBA loans were denied outright.

So, it’s not uncommon to have your application declined, and it’s a good idea to know your options if you fall into this camp. If your application for an SBA loan is denied, your lender will be your first point of contact. They should provide you with a letter explaining the reason why you were denied, and they can help provide information about your options after that. For example, you may be able to appeal the decision or you may have to wait a year before applying again.

If you’re not able to find a workaround, here are a few other funding alternatives that you may consider looking into besides SBA loans: