How To Get an SBA Loan in 2025 [Easy Method]

An SBA loan is one of the most popular types of loans for small businesses, and for good reason. Because SBA loans typically offer low interest rates, long repayment terms, and various loan programs to fit almost any small business. Now I'll be up front with you. Getting an SBA loan isn't hard, but there are a few requirements and steps that must be met before you can be approved for one. If you want a sneak peek into the SBA loan process and a better chance of approval, this video is for you. Stay tuned. Hey everyone, Karan here from Life Accounting, where we help you save on taxes and increase your wealth. Okay, so we already know that SBA loans tend to offer low interest rates, long repayment terms, and various loan programs. But here's something else I want you to know. The SBA themselves do not provide loans. The SBA partners with lenders to provide the loans and then guarantees 75-90% of the loan for the lender. And this guarantee by the SBA results in better terms and easier qualifications for small businesses. Currently, the SBA offers three main types of funding programs. The first and most popular funding program is the 7A loan. This program provides a variety of different loan types with funding up to $5 million in terms up to 25 years. The second funding program offered by the SBA is a microloan. Now microloans are loans up to $50,000 for startups and small businesses with terms up to 6 years. The last funding program you'll find at the SBA is a 504 loan. Now 504 loans are very specific and offer loans up to $5.5 million for the purchase of commercial real estate, land, and equipment in terms up to 25 years. Each SBA loan type will have slightly different requirements, but there are a few general requirements that must be met to be approved for an SBA loan. First, for-profit business. To be eligible for a SBA loan, you must be a for-profit business. You must be owned and operated in the United States, and must have a mailing address in the United States. Additionally, you must also be legally organized as a sole proprietorship, corporation, partnership, or LLC. Unfortunately, most non-profit organizations are not eligible for an SBA loan. Next, you must be in an eligible industry. Not all businesses are eligible to receive a loan from the SBA because of the industry they're in. These include businesses that primarily engage in lending activities, gambling, lobbying, or politics. Or businesses that provide life insurance, or have what is deemed a speculative business such as medical research. Also businesses that are passive in income, deal with pyramid sales, distributions, or compensations, primarily offer religious services, sell adult entertainment services, or package SBA loans. You also must be an eligible owner. Certain owners of a business void the ability for the business to get an SBA loan. An owner is someone with 20% or more ownership of the company. A business is not eligible for an SBA loan if the owner of the company is incarcerated, on probation, subject to formal criminal charges, or is delinquent or has defaulted in the past on a federal loan or financing program. Having a criminal record does not automatically disqualify you unless the crime is considered a felony of moral turpitude, which means it involves violence or dishonesty. Next, you're going to need investment. Another requirement for an SBA loan is that you have invested in the success of the business. This can be via time or via money to get the business started and continue the operations of the business. Then there's business size. Your business must be considered a small business as defined by the SBA. What is considered a small business will differ depending on your industry. For example, depending on your industry, what can be considered a small business can range from under 100 employees to under 500 employees. In addition to employees, your revenue and business net worth will help determine if you are classified as a small business. Say you're unsure if you qualify as a small business, the SBA actually has an interactive tool that you can use. Then you're going to need limited options for funding. SBA loans were created to help those who may have trouble getting a loan elsewhere actually get a loan. Most people don't know this, but to be eligible for an SBA loan, you actually have to be ineligible for financing options elsewhere. You won't have to provide proof of this, but your SBA lender will generally document this. The next general requirement is time in business. Outside of SBA cap lines, which require you to be in business for at least a year, the SBA doesn't have a set amount of time you need to be in business to be approved. With that being said, different lenders may have their own requirements. And generally, the longer you've been in business, the easier it will be for you to get approved for an SBA loan. Those who just started their business and have no experience in that industry will be seen as risky by lenders. Many lenders will require you to be in business for at least two years at a minimum. But there are lenders who do offer SBA loans to startups. If you have been in business less than a year, the ability to demonstrate revenue growth over time will be extremely important. Another requirement is personal credit. Your personal credit score is a factor when it comes to being approved for an SBA loan. Similar to your time in business, the SBA does not require a minimum credit score, but specific lenders do. At a minimum, lenders will typically want you to have a 640 score or higher, but a 700 or higher will give you the best chances of approval. Speaking of credit, business credit is also a factor when it comes to being approved for an SBA loan. The SBA lenders will use the FICO Small Business Scoring Service, also known as the SBSS. Your business score will range from 0 to 300, and the SBA uses your SBSS score to pre-screen those who apply for 7A loans. Now the SBA will want to see a minimum business FICO score of at least 155, but lenders may set their own minimum score for approval. If your business FICO score isn't high enough, having a higher personal credit score will help your approval chances. You're also going to need collateral. The SBA requires lenders to obtain collateral to secure the loan from all owners of the business, aka anyone who owns 20% or more of the business. Collateral will typically be in the form of a personal guarantee and other qualified collateral. Qualified collateral can be office equipment, machinery, buildings, accounts receivable, inventory, or a second mortgage on a home. Note that collateral isn't required for loans under $25,000. For loans over $350,000, collateral must cover as much of the loan as possible. The last general requirement to get an SBA loan for your small business is personal and business documents. The exact documents you will need to provide will differ depending on the loan program, but here are the documents you can expect. A business plan, personal financial statements, business financial statements, business certifications or licenses, personal and business tax returns, your business debt schedule, bank statements, and incorporation documents. As mentioned, each SBA loan program will have its own specific requirements, but those are the general requirements. So is it worth it to apply for an SBA loan? Well, the biggest benefit of an SBA loan is that SBA partners with lenders to provide the loans and guarantees 75-95% of the loan for the lender. This results in better terms and easier qualifications for small businesses, especially startups. The biggest downside is that the SBA loan comes with increased amount of paperwork and approval speed can be much, much slower than other lenders. If you can weather the time for approval, an SBA loan may be a great option for your business. Look, I'm going to place a few videos on the screen I think you should watch next. Be sure to check them out. Also, if you found this video helpful, do me a favor, hit that like button for me. It helps others to find this video on YouTube. And subscribe to the channel for more information that helps you save on taxes and build your wealth. I'm Quran from Life Accounting and I'll see you in the next video.