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SBA Loans Explained: 7(a), 504 and Microloans in Plain English

By the GoHarvest editorial team · Updated · 3 min read · Business financing basics

Short answer

SBA doesn't usually lend directly. It guarantees part of loans made by banks and other approved lenders, which makes them willing to lend on longer terms. Standard 7(a) loans go up to $5 million, SBA Express up to $500,000, microloans up to $50,000, and 504 loans finance real estate and long-life equipment. Since July 2026 a borrower can combine 7(a) and 504 for up to $10 million.

Key points

  • 7(a) is the general-purpose program; 504 is for fixed assets; microloans are small loans through nonprofit intermediaries.
  • SBA caps how far above a base rate lenders may price variable-rate 7(a) loans, from base + 3% on larger loans to base + 6.5% on loans of $50,000 or less.
  • Owners of 20% or more generally must personally guarantee.
  • Eligibility rules (size, use of funds, ownership and citizenship) changed several times in 2025–2026. Check the current SOP with your lender.

The SBA's loan programs are the closest thing U.S. small businesses have to long-term, bank-priced credit when a bank wouldn't lend on its own. They're also surrounded by myths, so it helps to start with what SBA actually does.

How SBA lending works

In its main programs SBA guarantees part of a loan that a bank, credit union or other approved lender makes. If the borrower defaults, SBA covers the guaranteed share of the lender's loss. That guarantee lets lenders offer longer terms and accept thinner collateral than they would otherwise. You still deal with the lender, which sets most terms within SBA's rules and makes the credit decision.

The main programs (as of November 2026)

Program Maximum SBA guaranty Typical uses Notes
Standard 7(a) $5 million 75% Working capital, equipment, real estate, refinancing, buying a business Up to 10 years, or 25 for real estate
7(a) Small $350,000 85% up to $150,000, 75% above Same as 7(a) Faster SBA processing
SBA Express $500,000 50% Term loans and revolving lines Lines up to 10 years
Export Express / international trade $500,000 / $5 million Up to 90% Exporters Specialized
CAPLines Varies Varies Seasonal, contract and builder working capital lines Up to 10 years
504 See below Not a guaranty share; CDC holds a second loan Buildings, land, long-life equipment 10, 20 or 25 years; fixed rate tied to 10-year Treasuries
Microloan $50,000 Direct loan to intermediary Working capital, inventory, equipment Average about $13,000; up to 7 years

504 structure. A 504 project is usually split three ways: a bank loan for about half, a Certified Development Company loan backed by SBA for about 40%, and the borrower's own contribution of about 10% (more for start-ups or special-purpose buildings). SBA's 504 page lists $5.5 million as the maximum 504 loan, and its July 2026 announcement describes up to $5 million through 504 within the new combined limit. Ask the CDC which cap applies to your project. 504 money can't be used for working capital or inventory.

Combined limit. Effective July 4, 2026, SBA raised the cumulative limit for borrowers who use both programs from $5 million to $10 million: up to $5 million through 7(a) and up to $5 million through 504.

What it costs

SBA lets lenders negotiate rates but caps them. For variable-rate 7(a) loans the maximum spread over the base rate depends on loan size:

Loan amount Maximum variable rate
$50,000 or less Base rate + 6.5%
$50,001 to $250,000 Base rate + 6.0%
$250,001 to $350,000 Base rate + 4.5%
Over $350,000 Base rate + 3.0%

Fixed-rate caps and the guaranty fees lenders pass on are set separately and change over time. 504 fees total roughly 3% of the debenture and can be financed. To see what a quoted rate means in monthly dollars, use our loan payment calculator.

What lenders usually ask for

  • Business and personal tax returns, typically for the last two or three years
  • Year-to-date profit and loss statement and balance sheet
  • A debt schedule listing everything the business owes
  • Projections and a business plan, especially for start-ups and acquisitions
  • Personal financial statements from owners
  • Details of collateral, leases, licenses and ownership

They're judging repayment ability above all, which is why debt service coverage matters. SBA's guidance since March 2026 sets a minimum of 1.1x for 7(a) Small Loans, and lenders often want more. Try our DSCR calculator.

Requirements that trip people up

  • Personal guarantees. Owners of 20% or more generally must guarantee.
  • Equity injection. Start-ups and changes of ownership must put in 10% of project costs under the 2025 procedures; acquisition rules were reworked again from October 1, 2026.
  • Ownership and citizenship. SBA tightened these rules in 2025 and again in 2026; as of SOP 50 10 8.1 (effective October 1, 2026), all direct and indirect owners must be U.S. citizens or U.S. nationals living in the U.S. Confirm the current rule with the lender.
  • "Credit elsewhere." SBA loans are meant for borrowers who can't get comparable credit on reasonable terms without the guarantee.
  • Use of funds. Passive real estate investment, speculation and some business types are ineligible.

Is it worth the paperwork?

For long-lived assets, acquisitions and larger working capital needs, SBA loans are often among the lowest-cost options a small business can access, precisely because of the longer terms and rate caps. For a small, fast need they can be slow. Many owners use a bank or SBA Express line for short gaps and save the full 7(a) or 504 process for big moves.

Sources

  1. SBA: 7(a) loans
  2. SBA: Types of 7(a) loans (lender table)
  3. SBA: 504 loans
  4. SBA: Microloans
  5. SBA news release, July 7, 2026: small businesses now eligible for up to $10 million in SBA financing
  6. eCFR 13 CFR 120.160: guarantees by 20% owners
  7. Congressional Research Service: SOP 50 10 8 (effective June 1, 2025)
  8. Starfield & Smith: SOP 50 10 8.1, effective October 1, 2026 (ownership, citizenship, acquisitions)
  9. Starfield & Smith: March 2026 update to 7(a) Small Loan underwriting (1.1x DSCR, SBSS)

Checked November 9, 2026. Program rules and scoring models change; the source is the authority.

Questions people ask

Do I apply to the SBA or to a bank?

For 7(a) and 504 you apply through a participating lender (for 504, a Certified Development Company works with a bank). Microloans come from SBA-designated nonprofit intermediaries. SBA's Lender Match tool can introduce you to lenders.

Is there a minimum credit score for SBA loans?

SBA leaves most credit judgment to lenders. For years it screened small 7(a) loans with a FICO SBSS minimum (raised to 165 in June 2025), but in 2026 it announced it would stop using SBSS for federally regulated lenders. Lenders still apply their own personal and business credit standards.

Can I use an SBA loan to start a business?

Yes, start-ups can qualify, but expect to put in cash of your own. SBA's 2025 procedures require start-ups and changes of ownership to contribute 10% of project costs, and lenders look hard at experience and projections.

How long does approval take?

SBA's lender table lists 5–10 business days for SBA's part on a standard 7(a) and 2–10 for 7(a) small loans. The whole process, including the lender's underwriting, appraisals and closing, usually takes weeks to months.

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