A Guide to Understanding Different SBA Loan Types

By Maddox Terner Sep8,2023
SBA Loan Types
Read Time:2 Minute, 42 Second

As we enter a new season of economic uncertainty unlike any before, small business owners need to know that you don’t have to go about it alone. The Small Business Association (SBA) offers a list of loans designed to help you weather the storm. SBA Loan Types

SBA loans differ in shape, size, and structure because they cater to everyone from microbusinesses to organizations with hundreds or even thousands of employees.

In this guide, we’ll talk about the three most popular SBA loan types to help you start your search for flexible funding.

SBA 7(a) Loans

The SBA 7(a) loan program is the most popular of these loans, and they’re also the easiest to find as almost all SBA lenders offer them.

Why is the SBA 7(a) so popular? It carries terms that are very attractive businesses owners, including:

  • Flexible use of loans clauses
  • Low-interest rates
  • Long repayment terms

The SBA 7(a) is a particularly attractive loan right now because unlike other products, you can use it as working capital. The terms mean that you can get the cash injection you need without worrying about a huge bill due in 12, 24, or 36 months.

To apply, you’ll benefit from a good personal credit score (675+) and you need to be in business for 0-3 years.

SBA Microloans

SBA microloans are perfect for solopreneurs and tiny businesses, and this is a rarity among SBA loans specifically and business loans more generally. The average loan amount is $13k, which makes it attractive to businesses with only one or two employees. Anyone can apply, but it’s particularly used among nonprofit child care centers.

The rates and fees are high compared to the SBA 7(a), but other requirements are lower. You don’t need to make a downpayment, you can be a brand new startup, and you only need a credit score of 625.

SBA Community Advantage Loans

SBA Community Advantage loans are a relatively recent addition to the SBA’s portfolio. They’re also unique among loans.

The SBA offers these loans to for-profit businesses in underserved markets. It particularly caters to women and minority, small business owners in both rural and urban underserved areas.

These loans offer many of the benefits of SBA 7(a). You can borrow a maximum of $250,000, and the interest rates are low. You can also use them for normal business purposes (but not for revolving lines of credit).

To qualify, you’ll need to meet the SBA’s strict guidelines on eligibility. Typically, that means living in a federally designated Low-to-Moderate Income community.

There Are SBA Loan Types for Everyone

Times are tough, but you have an ally in the SBA. SBA loans are easier to get than the typical business loan because they’re backed by the government. What’s more, there are SBA loan types for all kinds of businesses – big, small, urban, and rural.

So if you’re running short on cash, consider your SBA loan options. With a decent credit score, a good business plan, and a commitment to carrying on, you could get the funds you need to weather the storm.

Did you find this helpful? Check out our Business archive for more great content.

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Maddox Terner

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