SBA loan guide: Requirements, types and application process for small businesses

While some entrepreneurs tap into their own savings to start or expand their business, others must rely on outside sources. Loans backed by the US Small Business Administration, or SBA, are a popular option—especially among early-stage small business owners.

While SBA loans offer attractive terms and may come with other benefits, many factors impact the decision to apply for this type of funding. Understanding the three main programs—7(a) loans, 504 loans and Express loans—can help business owners choose the right financing solution.

What is an SBA loan?

Established in 1953, the SBA supports small businesses nationwide. Beyond loan guarantees, it provides counseling, training and advocacy. To fulfill this mission, it offers several programs and initiatives—including education and mentorship—that are designed to support the success of small businesses. It also advocates on behalf of small business interests in Congress.

The SBA loan program is a key component of its mission. In 2022, the SBA backed almost $43 billion in funding for small businesses across the country. These government-backed loans offer multiple benefits, including favorable interest rates, longer repayment terms and financing to meet a wide array of needs.

How does an SBA loan work?

The SBA guarantees 50% to 90% of each loan, while approved lenders like First Citizens provide the actual funding. Government backing helps reduce lender risk, enabling the SBA to extend loans to businesses that may not qualify for traditional small business financing . This makes it easier for small business owners to access the capital needed for growth and expansion.

What can SBA loans be used for?

The SBA offers several loan programs designed to meet a variety of purposes. Thanks to their competitive terms, flexible overhead qualification requirements and favorable interest rates and fees, SBA loans are often an attractive funding option for small businesses at all stages of growth.

Some common uses for the funding include:

• Business expansion costs
• Working capital for daily operations
• Seasonal inventory and cash flow needs
• Debt refinancing or consolidation
• Purchase of fixed assets like property and equipment

Because each loan program is intended for a specific purpose, it's important to understand the most popular SBA loans for small business funding and their requirements.

SBA loans versus conventional business loans

SBA loans are designed to make financing more accessible for small businesses by reducing risk for lenders through government guarantees. This backing translates into lower interest rates, smaller down payment requirements and longer repayment terms.

Conventional business loans, on the other hand, give borrowers faster access to capital with fewer restrictions on use. While they often require higher down payments and collateral, the approval timeline can be significantly shorter. These loans also offer flexibility for businesses with strong credit and financial histories, although higher interest rates and stricter terms can increase the cost of borrowing compared to SBA options.

Key differences comparison

Choose an experienced SBA lender like First Citizens for guidance through the application process. Preferred Lender Program, or PLP, banks can offer faster processing through in-house approval authority.

PLP benefits include in-house underwriting that can reduce processing time, dedicated SBA specialists, streamlined documentation and direct SBA communication. PLP status indicates SBA confidence in the lender's underwriting expertise.

SBA loan documentation requirements

SBA loan documentation requirements vary by loan amount and type. We provide documentation checklists and guidance to help prepare complete applications. To get started, applicants need:

• Copies of business license and lease
• Financial statements, including a profit-and-loss statement and financial projections
• Business and personal tax returns from the past 3 years
• Business debt schedule
• Personal financial statement
• Business plan, including financial projections, market analysis and detailed use of funds

Common SBA loan mistakes to avoid

Applying for an SBA loan requires careful preparation. Even strong businesses can face delays or denials if they make avoidable errors. By understanding the most common mistakes, businesses can improve their applications and move through the process more smoothly.

Application errors

Errors in the loan application itself are one of the fastest ways to slow down approval. Missing signatures, incomplete sections and inconsistent information create red flags for underwriters. Many borrowers also fail to clearly define the purpose of the loan or provide enough detail about how the funds will be used. Lenders and the SBA look for alignment between the request and the business's financial information. Review every field before submitting and confirm that the application tells a consistent, accurate story.

Documentation problems

SBA loans often require extensive documentation, and missing or inaccurate records can be a cause of delay. Financial statements that don't match tax returns, projections without supporting detail or outdated licenses raise concerns during underwriting. Remember that personal financial information is just as important as business records. To avoid setbacks, gather and organize materials in advance.

The bottom line

SBA loan success depends on proper preparation and experienced guidance. Our SBA specialists can help with application preparation, documentation review and process navigation.

Your SBA loan officer can guide you through the process, work with you to ensure you have your documentation in order and answer any questions you may have along the way.