SBA FAQs

What is the United States Small Business Administration?
The SBA is an independent agency of the executive branch of the United States government. It helps American small businesses with advocacy, procurement, management and financial assistance.

What is an SBA guaranty?
It is an incentive given to lenders to encourage them to loan to small businesses. A guaranty given to a lender ensures a certain percentage of a loan; if a borrower defaults on their loan, the SBA will reimburse that percentage of the loan.

How do SBA loan programs work?
There are three separate loan programs offered by the SBA. For each of them, a lender is given a guaranty up to a certain percentage of the loan (the percentage varies by the program). The lender then grants the loan directly to the applicant business. The SBA itself does not grant loans.

How do the loan programs differ?
The 7(a) loan guaranty is the SBA's most commonly-used program. Its eligibility requirements are broad, to accommodate a wide variety of businesses, and the funds can be used for any sound business purpose.

The Certified Development Company (504) program is when a CDC and a lender team up to cover 90% of an applicant business's purchase of a large fixed asset. There are 270 CDCs nationwide, and they operate on a local level to boost their community's economy through offering financing to small businesses.

The Microloan Program grants loans of up to $35,000 to small businesses through local intermediaries.

What businesses are eligible for SBA loans?
Most businesses are eligible for SBA assistance. Applicant businesses must be for profit; conduct business in the United States or its possessions; all businesses owners of 20% or more must have personal equity to invest; and the business must also use alternative sources of financing. For details, contact your local SBA District Office.