Frequently Asked Questions (FAQs)

Frequently Asked Questions (FAQs)


How Do SBA Loans Work?

The Small Business Administration (SBA) is a federal agency designed to help small businesses access funding. SBA loans are comparable with the most lucrative financial products from big banks but are easier to acquire, making them a desirable option for younger businesses who haven’t had time to build credit.

Of course, any business looking for financing would be hard-pressed to find a loan with better terms than an SBA loan. This wide relevancy is because of the unique way the SBA has designed their loan programs.


SBA 7(a) Loan

The SBA 7(a) Loan is the most flexible of the 3. You can use it to:

  • Buy land
  • Cover construction costs
  • Buy or expand an existing business
  • Refinance your existing debt
  • Buy machinery, furniture, supplies, or materials


SBA 504 Loan

The next most popular loan is the 504 Loan. It’s a little more complicated than the 7(a) loan. This loan is used to fund projects, so the SBA will want to examine the project thoroughly. When your loan is funded, the lender will initially cover 50% of your costs, and the SBA will cover 40%, leaving you 10% to fund another way. You also have to guarantee 20% of the loan.

Here are some of the uses approved for an SBA 504 loan:

  • Purchasing existing buildings
  • Purchasing land and land improvements
  • Constructing new facilities
  • Modernizing, renovating, or converting existing facilities
  • Purchasing long-term machinery


SBA Express Loan

Finally we come to the Express Loan. SBA 7(a) loans take a long time to process due to a detailed paperwork process. Express loans are very similar to 7(a) loans except they are approved more swiftly. The loan still won’t be approved overnight, but it is much faster than the 7(a) loan approval process.