U.S. Small Business Administration Loans Review

The Small Business Administration is a government agency dedicated to help small businesses with their legal, financing and training needs. The SBA is not a direct lender. Instead, it guarantees and sets the guidelines for the loans its lending partners provide. The SBA guarantees up to 85 percent of a business loan's principal, which reduces the risk for lenders and allows them to have more flexible eligibility requirements and lower interest rates.

How Does the SBA Work?

Loan applications must be processed through an SBA lending partner. You can find a list of approved lenders by state or zip code on SBA.gov. The lender you choose will be in charge of the transaction but must follow the guidelines set by the SBA.

What Are The Interest Rates?

Interest rates are determined by each individual lender but must fall within the maximum rate set by the SBA. The SBA's maximum rate is determined by a base rate: the London Interbank One Month Prime, also known as LIBOR, plus 2.25% to 4.75% depending on the size and term of the loan.

How Much Money Can I Borrow?

The SBA maximum loan amount varies by program. However, the maximum loan amount is $5 million -- $3.75 million for any one borrower.

Which States Does the SBA Operate In?

The SBA guarantees loans in all 50 states.

What Is the Application Process Like?

The application process varies by lender but typical requirements for an SBA loan application include information on personal background, resumes of the management team, a business plan, personal credit reports of the principal business owners, a business credit report, income tax returns for the last 3 years, company financial statements, bank statements, legal documents and in some cases collateral.

How Is the SBA Better than Other Lenders?

SBA loans are only for businesses who cannot access other forms of financing on reasonable terms. The SBA acts as a guarantor for businesses who don't qualify for commercial business loans and would otherwise have to resort to high-interest loans from alternative lenders. SBA lenders must follow strict guidelines, which protects borrowers. Also, interest rates and fees for SBA loans are generally more favorable than those offered by non-SBA commercial loans.