A Primer on SBA Loans for Potential Borrowers

By: Serge Filatov, Esq.

Navigating the landscape of Small Business Administration (SBA) loans can be a crucial step for business owners seeking to launch, sustain, or expand their businesses. This guide aims to provide potential borrowers with an in-depth understanding of SBA loans, highlighting their benefits and key aspects to consider, including when to consult an SBA loan attorney.

Understanding the SBA

The Small Business Administration, established in 1953, primarily focuses on supporting small businesses in various ways, including through loan guarantee programs. The SBA’s role is to enhance small businesses’ access to capital, aid in disaster recovery, or to ensure participation in federal contracting​.

Why SBA Loans?

SBA loans are designed to help businesses that might not qualify for traditional bank loans but can also be used by businesses that would qualify but which otherwise prefer more favorable terms. SBA loans offer favorable terms, lower down payments, flexible overhead requirements, and no collateral needed for some loans.

Eligibility for SBA Loans

To qualify for an SBA loan, your business must meet certain criteria, such as being for-profit, based and operating in the U.S., independently owned and operated, and not dominant in its field. The business can be in various legal forms like sole proprietorships, partnerships, limited liability companies, or corporations​.

Key SBA Loan Programs

Understanding the main SBA loan programs can help you determine the best fit for your business needs, and seeking the advice from an SBA loan attorney may offer additional clarity:

  1. 7(a) Loan Guaranty Program

The 7(a) program is the SBA’s most popular loan program, offering flexibility for various business needs, including working capital, refinancing debt, and purchasing real estate or equipment. In FY2021, over 50,000 7(a) loans were approved, totaling $36.8 billion​.

Loan Terms and Guaranty

The SBA guarantees a portion of these loans, sharing the risk with lenders. This guarantee makes it easier for small businesses to obtain loans with reasonable terms. However, personal guarantees from borrowers are usually required​.

Fees and Interest Rates

The SBA charges fees for loan guarantees, which are sometimes passed on to borrowers. These include an up-front guaranty fee and an ongoing servicing fee. Interest rates on 7(a) loans are usually reasonable and are either fixed or variable, based on rates like the prime rate or LIBOR​.

  1. 504/CDC Loan Program

This program focuses on long-term, fixed-rate financing for major assets like real estate and equipment. It is administered through Certified Development Companies (CDCs) and is designed to promote business growth and job creation.

  1. Microloan Program

For smaller capital needs, the Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand.

  1. Disaster Loans

For businesses impacted by natural disasters, the SBA offers specific loans like the EIDL to help in recovery. These loans can be used for repair, replacement of assets, or working capital​.

Application Process and Tips

  1. Determine Eligibility: Ensure your business meets the SBA’s criteria.
  2. Select the Right Program: Choose the loan program that best suits your business needs.
  3. Prepare Documentation: Gather financial statements, business plans, and other necessary documents.
  4. Find an SBA Lender: Use the SBA’s lender match service or contact lenders that offer SBA loans.
  5. Complete the Application: Work closely with your lender to complete the application process.
  6. Work with your Attorney: An SBA loan attorney, which has experience in handling SBA loans, can ensure you are getting the deal you expect and that the terms of the loan documents are fair and reasonable.


SBA loans offer significant benefits for small businesses, from flexible terms and lower down payments to support for disaster recovery. By understanding the different programs and preparing thoroughly, potential borrowers can effectively leverage these loans to grow and sustain their businesses, especially with the guidance of a skilled SBA loan attorney.

All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations.  No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation.