Business loans backed by the Small Business Administration can be an attractive and affordable source of business financing. Yet SBA loans are also notorious for having strict qualification standards. 

SBA loans come in several different varieties. The reason your business wants to borrow money and the loan amount you’re requesting can both have an impact on the type of SBA loan your company might be eligible to receive. 

Below is an overview of seven different business loans backed by the Small Business Administration. You’ll also find interesting stats about how much funding the SBA issued under these programs in 2020. SBA loans can be hard to qualify for, but not impossible.

Each SBA loan features different qualification requirements and eligibility standards. So, if an SBA loan is on your radar, you should be aware of these important details.  

Qualifications for the SBA 7(a) Loan Qualifications

The SBA 7(a) loan is the flagship loan backed by the Small Business Administration. In the year 2020, around 42,000 of these loans were issued to small businesses throughout the United States. Collectively, those borrowers received $22.55 billion in loan proceeds. 

Your business may be eligible for the 7(a) loan program if it: 

• Operates as a for-profit business.
• Qualifies as a small business according to the SBA’s size standards.
• Does business or intends to do business in the United States or its territories.
• Is not past due on existing credit obligations owed to the U.S. government.
• Will apply the funds it borrows toward a sound business purpose.
• Can demonstrate a legitimate business need to borrow the requested loan amount.
• Has a sufficient amount of capital invested in the business.
• Has used other financial resources, including personal assets, before applying for financing.
• Is not an ineligible business according to the SBA.

Credit Requirements

On top of the eligibility requirements above, your business typically needs to be able to satisfy an SBA lender’s business credit requirements to qualify for a 7(a) loan as well. 

Most SBA lenders use FICO Small Business Scoring Service scores to evaluate potential borrowers. FICO SBSS scores are based on a hybrid of both your personal and business credit reports. 

FICO SBSS scores range from 0 to 300. If you hope to qualify for an SBA 7(a) loan, your business needs a minimum FICO SBSS credit score of 155. 

Qualifications for the SBA 504 Loan 

The SBA 504 loan is another popular financing option among small business owners who want to borrow up to $5 million for major fixed assets. In 2020, lenders issued over 7,000 of these loans totaling more than $5.8 million to eligible small businesses. 

Businesses that are eligible for 504 loans need to: 

• Be a for-profit, U.S.-based business (or be based in a U.S. territory).
• Possess a tangible net worth that does not exceed $15 million.
• Have an average income (net) that does not exceed $5 million after taxes for at least two years preceding its loan application.
• Show a plan to use the funds for a 504 Program-approved purpose.
• Avoid participating in rental real estate investment or speculation. 

Credit Requirements

The Small Business Administration doesn’t set a minimum credit score requirement for 504 loans. However, it does state that borrowers will need to demonstrate “good character” and a historical willingness and ability to repay their debts.

Qualifications for the SBA Express Loan 

SBA Express loans are available to eligible small business borrowers for up to $350,000. The primary benefit of this type of loan is the fact that the SBA will review and respond to your loan application within a short 36-hour or less time frame. 

To qualify for an SBA Express loan, your company must: 

• Be a for-profit business.
• Do business in the United States or its territories (or propose to do so).
• Have a sufficient amount of owner equity to invest in the business. 
• Show that it has used alternate financing methods (personal assets included) prior to applying for an SBA Express loan. 

Individual lenders make the call on SBA Express loans when it comes to minimum credit score requirements. So, you may want to ask your SBA-approved lender about these details before you fill out a loan application. 

Additionally, if you’re borrowing less than $25,000, the SBA doesn’t require you to put up any assets to secure the loan. But if you’re borrowing more than that amount, you should be prepared to supply collateral to back your loan. 

Qualifications for the SBA Microloan 

The SBA Microloan program is designed to help small businesses in underserved communities. In 2020, SBA lenders issued more than 5,800 of these loans for nearly $85 million— with 34% going to Black-owned small businesses. 

SBA Microloans cap out at $50,000. Borrowers can use the funds for working capital, supplies, inventory, equipment, furniture, and similar purposes. 

Small businesses owned by entrepreneurs in the following categories may be able to qualify for an SBA Microloan: 

• Women
• Low-Income
• Veteran
• Minority
• Other

In addition to being an eligible small business owner, you may need to complete business training or planning requirements for a lender to consider your application. You also cannot owe delinquent or defaulted debt to the federal government when you apply for new financing. 

Finally, your business will need to pass a “no credit elsewhere” test. In other words, there needs to be a reason why your company won’t qualify for financing via an alternative route. 

Credit Requirements

The Small Business Administration doesn’t set a minimum credit score requirement for Microloans. Instead, individual lenders set their own credit and underwriting guidelines. Therefore, it’s wise to ask a lender about its qualification requirements before you apply. 

Qualifications for the SBA Disaster Loan

The year 2020 was historic for the SBA disaster loan program. The agency issued $211 billion in disaster loan funding through the COVID-19 EIDL program — triple the number of funds it issued in the previous 67 years combined. 

SBA disaster loans come in four different varieties: 

• Physical Damage Loans
• Mitigation Assistance Funding
• Military Reservist Loans
• Economic Injury Disaster Loans (EIDLs) 

Here’s a closer look at the eligibility requirements for the disaster loans above. 

Economic Injury Disaster Loans

Your business may be eligible for the COVID-19 EIDL if it can prove that it lost money due to the pandemic. The loans are available until the end of 2021, or until funding runs out. 

Additionally, a COVID-19 EIDL advance of up to $15,000 may be available to businesses operating in eligible low-income communities. These loan proceeds don’t have to be repaid. 

The EIDL program does feature the following minimum personal credit score requirements for small business borrowers: 

• 570 minimum credit score for loans of $500,000 or less
• 625 minimum credit score for loans of $500,000 or more

Finally, you will need to provide collateral for loans over $25,000. And if your business is borrowing more than $200,000, a personal guarantee is necessary too. 

Other SBA Disaster Loans

If your business or private nonprofit organization operates in a declared disaster area, it might be eligible for one of the SBA’s other disaster loans. 

Qualifying disasters may include: 

• Flooding
• Hurricanes
• Wildfires
• Areas Experiencing Civil Unrest
• Etc. 

Homeowners and renters might also be eligible for financing assistance under an SBA disaster loan program. However, you would need to prove that you incurred losses not covered by insurance or Federal Emergency Management Agency (FEMA) funding to qualify. 

For disaster loans over $25,000 ($50,000 for Military Reservist Loans), be prepared to supply acceptable collateral. However, if you don’t have any collateral available, you may still qualify. 

Qualifications for the SBA Export Express Loan 

The SBA Export Express Loan offers up to $500,000 worth of funding to eligible businesses via a streamlined process. You can apply for this loan directly from an SBA-approved lender, which will use its own application forms and procedures to see if your business qualifies. 

Businesses eligible for an SBA Export Express Loan must: 

• Have been in business for 12 months or more.
• Prove that funds will be used for eligible export development projects.

Once you apply for this loan with an SBA Express Lender, your business can expect an answer (aka approval or denial) from the Small Business Administration within 36 hours or less. 

Qualifications for the Community Advantage Loan 

The Community Advantage program is a new SBA pilot program that aims to be a credit resource for small businesses in underserved areas. 

The program makes 7(a) loan guarantees available to “mission-oriented” community leaders that might not be able to qualify for traditional business financing. 

Your business might be able to borrow up to $250,000 through the Community Advantage program if it: 

• Can satisfy the SBA’s size standards. 
• Is able to prove that it has a viable business idea. 

The Community Advantage program stands out among other SBA loans for another reason. A limited balance sheet or limited collateral will not automatically exclude your business from funding. 

Credit Requirements

To qualify for a Community Advantage loan, your business needs a minimum FICO SBSS credit score of 140. 

Build Your Business Credit with CreditStrong

No matter which type of business loan you’re seeking — SBA or otherwise — having good business credit can work in your favor. One potential way to build business credit is to open business tradelines that report to the business credit reporting agencies. 

The trick, of course, is finding lenders that are willing to work with your company when you have no established credit. Net 30 accounts are one option that might help you here. Additionally, you may want to consider opening a business credit builder loan. 

The CreditStrong Business Credit Builder account gives eligible business borrowers the chance to establish business credit using an EIN. If you qualify, your business will receive an instant bank loan with the funds locked in an FDIC-insurance business savings account as collateral. 

Your company can then make small monthly payments on its credit builder loan for up to 120 months. So, when you pay on time, you could establish up to 10 years worth of timely payment history with major business credit bureaus. 

On top of these perks, the loan is flexible. If you desire to do so, you can cancel the credit builder account at any time with no penalties. In short, there’s little risk and a big potential upside for businesses that want to establish a solid credit rating.

CreditStrong for Business is the only 0% interest business credit builder in the nation

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