Last updated: November 2026
A term loan gives your business one lump sum that you repay on a fixed schedule, usually monthly, over a set number of years. An SBA loan is a term loan (or line) made by a bank, credit union or other approved lender and partly guaranteed by the U.S. Small Business Administration. The guarantee, up to 85% on smaller loans, lowers the lender's risk, so SBA loans offer longer terms, smaller down payments and capped rates, in exchange for more paperwork and a slower process. Most lenders check the same six things: personal credit, time in business, revenue and cash flow, existing debt, collateral or a personal guarantee, and documents that prove it all. This guide connects our articles on SBA programs, loan requirements, buying a business and the legal pieces that come with a loan.
How SBA loans work
You apply to an SBA lender, not to the SBA. The lender underwrites the loan with its own credit standards plus SBA rules, and the SBA guarantees part of it. The borrower still owes the full debt, and owners of 20% or more usually sign personal guarantees. SBA loans are meant for businesses that cannot get comparable credit elsewhere on reasonable terms, although many strong businesses qualify because a conventional loan would need a bigger down payment or a shorter term. What is an SBA loan? covers each program, current rates and fees, the 2026 rule changes and how to apply.
| Program | Maximum amount | Typical uses | Maximum term |
|---|---|---|---|
| SBA 7(a) | $5 million | Working capital, equipment, real estate, refinancing, buying a business | 10 years (25 for real estate) |
| SBA Express | $500,000 | Working capital, lines of credit, equipment | Same as 7(a) |
| SBA 504 | $5.5 million (SBA-backed portion) | Owner-occupied real estate, construction, long-life equipment | 10, 20 or 25 years |
| SBA microloan | $50,000 | Startups and small needs: inventory, supplies, equipment, working capital | 7 years |
What lenders require
The bar depends on the lender. Banks generally want 2 years in business, $100,000 or more in annual revenue and a 660 to 700+ credit score. Online lenders such as OnDeck publish 1 year, $100,000 and 625. SBA 7(a) loans add federal rules: since March 1, 2026, every owner must be a U.S. citizen or national. Revenue-based products weigh bank deposits more than credit. Business loan requirements breaks this down by loan type, explains the five Cs of lending and includes a documents checklist.
Term loans: matching the loan to the asset
A term loan suits planned investments such as equipment, a renovation or an acquisition, because the payments are predictable. The rule of thumb is to match the term to the useful life of what you buy: short terms for inventory or a cash gap, longer terms for equipment and real estate. Term loans for business summarizes short-, intermediate- and long-term options, eligibility and the application process.
Financing the purchase of a business
A loan to buy a business is usually an SBA 7(a) loan, a bank term loan or a mix of a loan and seller financing. The lender underwrites the business you are buying: it wants a valuation that supports the price, historical cash flow that covers the new debt (SBA now requires 1.25x for most purchases) and a down payment of at least 10% for an SBA deal, or often 20% to 30% at a bank. Loan to buy a business walks through a $1 million example, the October 1, 2026 SBA changes for acquisitions and the steps from letter of intent to closing.
Personal guarantees and your personal credit
A personal guarantee is your written promise to repay the business's debt if the business cannot, which lets the lender pursue your personal assets after a default even if the borrower is an LLC or corporation. In the Federal Reserve Banks' latest survey, 59% of employer firms with debt had used one, and SBA loans require an unlimited guarantee from every owner of 20% or more. Personal guarantee for a business loan explains the types and how to negotiate the cap and release terms.
A business loan reaches your personal credit in three ways: the hard inquiry at application, your personal liability (sole proprietor or guarantor) and whether the lender reports the account to consumer bureaus. Do business loans affect personal credit? covers each one and how to protect your score.
Collateral, security agreements and loan priority
A secured business loan comes with a security agreement, the contract that gives the lender a security interest in collateral such as equipment, inventory, receivables or vehicles. The UCC-1 financing statement is a separate public filing that announces that interest to other creditors. What is a security agreement? explains how UCC Article 9 works and what to review before you sign.
When a business has more than one lender, order matters. A subordinated loan ranks below senior debt, so it is repaid only after the senior lender in a default, and it usually costs more. Businesses use subordinated debt to borrow more than a senior lender will provide alone, often for acquisitions and expansion. What is a subordinated loan? covers the capital stack and subordination agreements.
Unsecured loans and funding without collateral
Unsecured loans are approved on cash flow and credit rather than specific assets, which suits service businesses with few hard assets. They are often faster but usually cost more, and many still require a personal guarantee. Unsecured business loans covers qualification, cost and the application process, and business funding without collateral summarizes the main no-collateral options.
Funding for women-owned businesses
Women business owners can use every program above, plus SBA resources for women-owned small businesses, community lenders and grants. Small business loans for women covers SBA and government programs, private and community options and how to prepare a strong application.
Documents to have ready
Whatever the loan, gathering paperwork early is the easiest way to speed it up. Most lenders ask for some mix of the following: recent business bank statements, business and personal tax returns, an income statement and balance sheet, a debt schedule listing current loans and advances, ownership and formation documents, business licenses, and a government ID for each owner. SBA lenders add their own forms and may ask for a business plan or projections, especially for a startup or an acquisition. For a purchase, expect the seller's financial statements and tax returns, the purchase agreement and a valuation. Consistent numbers across these documents matter: a gap between tax returns and bank deposits is one of the most common reasons an application stalls.
Comparing loans with FSE
FSE is an independent business funding brokerage that works with a panel of lending partners. If an SBA loan is the right fit but the timeline is too long, one application can also show faster options to compare. To be considered, a business generally needs at least 1 year in business and $10,000 or more in monthly revenue.
Frequently asked questions
Does the SBA lend money directly?
Usually not. You borrow from an approved lender, and the SBA guarantees part of the loan. The SBA's free Lender Match tool can connect you with participating lenders.
How much down payment does a business loan need?
It depends on the loan. SBA acquisitions require at least 10% equity, banks often want 20% to 30% to buy a business, and many working-capital loans need no down payment but do need a guarantee.
Do I have to sign a personal guarantee?
For most small business loans, yes, and SBA loans require one from every owner of 20% or more. You can often negotiate the type, cap and release terms.
How long do SBA loans take?
Typically weeks to months, depending on the program, the lender and how complete your documents are. SBA Express is faster than a standard 7(a) but still takes weeks.
Not sure which loan fits? Apply now and compare options from FSE's lending partners.
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