Question 1

What is an SBA loan?

Accepted Answer

An SBA loan is a business loan partially guaranteed by the U.S. Small Business Administration. The SBA doesn't lend directly — banks do — but the guarantee lets banks offer longer terms and lower down payments than conventional loans.

Question 2

What is the difference between SBA 7(a) and 504 loans?

Accepted Answer

7(a) is the most flexible program: up to $5M for working capital, acquisitions, or mixed use, with terms up to 25 years for real estate. 504 is designed for fixed assets like commercial real estate and heavy equipment, with a typical structure of 50% bank loan, 40% CDC debenture, and 10% borrower down payment.

Question 3

Who qualifies for an SBA loan?

Accepted Answer

Generally: a for-profit U.S. business, owner-operated, meeting SBA size standards, with reasonable owner credit (typically 650+), and the ability to repay from cash flow. Startups can qualify with strong projections and owner experience.

Question 4

What credit score do I need for an SBA loan?

Accepted Answer

Most SBA lenders look for a personal credit score of 650 or higher. Scores below that aren't an automatic disqualification but will require stronger cash flow or collateral.

Question 5

How much down payment is required?

Accepted Answer

There is no single SBA-mandated minimum for most 7(a) loans — it varies by lender, credit strength, and collateral. With strong collateral 10-15% is common; working-capital-only loans with no hard collateral often require 20-30% or more. 504 loans have set minimums: 10% standard, 15% special-use, 20% startups. Acquisitions require at least 10% buyer equity injection.

Question 6

How long does SBA loan approval take?

Accepted Answer

Typically 30-90 days from complete application to funding, depending on the program and lender. Express loans can be faster. Having documents ready is the biggest factor you control.

Question 7

What is DSCR and why does it matter?

Accepted Answer

Debt Service Coverage Ratio measures whether a business generates enough cash to cover loan payments. It's calculated as annual net operating income divided by annual debt payments. Most SBA lenders require 1.25x or higher.

Question 8

Can I use an SBA loan to buy a business?

Accepted Answer

Yes — 7(a) loans are commonly used for business acquisitions. Under SOP 50 10 8.1 (effective Oct 2026), buyers need 1.25x DSCR on historical earnings, at least 10% equity injection, and deals of $3M+ require an independent Quality of Earnings report.

Question 9

What is the 51% owner-occupancy rule?

Accepted Answer

For SBA real estate loans, the borrower's business must occupy at least 51% of the rentable space in an existing building (60% initially for new construction, growing to 80%). This prevents using SBA loans for passive investment property.

Question 10

Do I need collateral for an SBA loan?

Accepted Answer

SBA lenders generally require available collateral to be pledged, but a lack of collateral alone won't decline a loan if cash flow is strong. Real estate loans are secured by the property itself.

Question 11

What fees are involved with SBA loans?

Accepted Answer

SBA guarantee fees apply on the guaranteed portion (they vary by loan size and term). Lenders may also charge packaging fees. As a broker, we don't charge borrowers upfront fees — we're typically compensated by the lending partner.

Question 12

How does a loan broker get paid?

Accepted Answer

Loan brokers are typically compensated by the lending institution when a referred loan funds. We don't charge borrowers upfront fees unless separately agreed in writing.

Question 13

What documents do I need to apply?

Accepted Answer

Typically: 3 years of business and personal tax returns, year-to-date financials, a business plan (especially for startups/acquisitions), personal financial statement, and details on the use of funds. Our free checklist covers everything.

Question 14

Can startups get SBA loans?

Accepted Answer

Yes, though it's harder. Startups need a solid business plan, relevant owner experience, good credit, and usually a larger equity injection. 7(a) is the main program for startups.

Question 15

What changed in SBA SOP 50 10 8.1?

Accepted Answer

Effective October 1, 2026: stricter acquisition rules including 1.25x DSCR on historical earnings, minimum 10% buyer equity injection, Quality of Earnings reports for $3M+ deals, and sellers allowed to stay up to 24 months as consultants.

Question 16

How long can an SBA loan term be?

Accepted Answer

Up to 25 years for real estate, up to 10 years for working capital and equipment under 7(a). 504 loans go up to 25 years. Mixed-use loans use a blended maturity based on the share of proceeds per purpose.