SBA Loans Explained in Plain English

The SBA is a guarantor, not usually a bank

When people talk about an “SBA loan,” they usually mean a loan made by a bank or other approved lender that is partially guaranteed by the U.S. Small Business Administration. That guarantee lowers the lender’s risk, which makes financing more accessible to first-time owners.

The programs you will hear about

Three SBA programs come up most often for new owners.

• 7(a) loans: the most common and flexible option, used for working capital, equipment, build-out and buying a business.
• 504 loans: long-term, fixed-rate financing for major assets such as real estate and heavy equipment.
• Microloans: smaller loans offered through nonprofit intermediaries, often paired with business training.

What it takes to qualify

Lenders look at your credit, how much of your own money you are investing, your relevant experience, the cash flow of the business and available collateral. For a deeper look, read our guide to what SBA lenders look for in a first-time owner.

Where to get free help

South Florida has free and low-cost resources for first-time borrowers, including Small Business Development Centers (SBDCs) and SCORE mentors. They can help you build a business plan and financial projections before you meet a lender.