SBA Loans Explained: What Small Business Owners Need to Know

In this post, we’ll break down what SBA loans are, how they work, the different types available, and how your credit union can help you navigate the process.

What Is an SBA Loan?

An SBA loan isn’t money directly from the government. Instead, the SBA partners with lenders—like credit unions and community banks—to make small business loans more accessible.

The SBA guarantees a portion of the loan, which reduces the risk for lenders. That means you, the business owner, may qualify for financing with lower down payments, longer repayment terms, and more flexible requirements compared to a traditional business loan.

Key Benefits of SBA Loans

• Lower Down Payments – Many SBA loans require less money upfront, making them easier for startups or growing businesses.
• Longer Repayment Terms – Depending on the loan type, terms may stretch up to 10–25 years, which helps keep monthly payments manageable.
• Competitive Interest Rates – Because the SBA backs part of the loan, lenders can offer lower rates than many conventional loans.
• Flexibility in Use – SBA loans can cover everything from working capital and equipment purchases to commercial real estate and debt refinancing.

Types of SBA Loans

There isn’t just one “SBA loan.” Here are the main types small business owners should know about:

• SBA 7(a) Loan - The most common SBA loan. Can be used for a wide range of purposes: working capital, buying equipment, refinancing debt, or even purchasing real estate.
• SBA 504 Loan - Ideal for purchasing fixed assets like commercial property or large equipment. Known for longer repayment terms and fixed interest rates.
• SBA Microloan - Designed for smaller funding needs (up to $50,000). Great for startups, home-based businesses, or those with limited credit history.
• SBA Disaster Loan - Available for businesses affected by natural disasters or economic downturns. Provides low-interest funding to help recover and rebuild.

Who Qualifies for an SBA Loan?

While qualifications vary by program, most lenders look for:

• A solid business plan showing how you’ll use the loan and repay it.
• Proof of business revenue and cash flow.
• Good credit history (both business and personal).
• A commitment to operate legally in the U.S.

Remember: credit unions often take a more personalized approach, looking at the whole picture—not just numbers on paper.

How to Apply for an SBA Loan

The process can feel overwhelming, but partnering with your credit union can simplify it. Here are the basic steps:

1. Evaluate Your Needs – Determine how much you need and what you’ll use it for.
2. Gather Documentation – Business plan, financial statements, tax returns, and legal documents.
3. Meet With a Lender – A credit union loan officer can explain options and help choose the right SBA program.
4. Submit Your Application – Your lender will work with the SBA to process and approve your loan.
5. Receive Funding – Once approved, funds can be used for approved business expenses.

SBA loans can be a powerful tool for fueling your small business growth. Whether you’re just starting out or looking to expand, understanding the basics of SBA loans helps you make informed financial decisions.

Ready to explore your options? Contact our business services team today and let’s talk about how an SBA loan—or another credit union business solution—can help your company thrive.