Key points
- The SBA guarantees loans made by lenders: 85% up to $150,000, 75% above, and 50% on SBA Express loans.
- With prime at 7.00%, 7(a) variable-rate caps run from 10.00% on loans over $350,000 to 13.50% on loans of $50,000 or less.
- For FY2027, the 7(a) upfront guaranty fee is 2% to 3.75% of the guaranteed portion, with waivers for some borrowers.
- SOP 50 10 8 cut 7(a) small loans to $350,000, restored a 10% equity injection and barred refinancing MCAs with 7(a) proceeds.
- On $150,000, a 10-year 7(a) at its rate cap costs $2,239.66 a month against about $16,875 a month for a 12-month MCA.
What the SBA actually does
You apply to an SBA lender, not to the SBA. If the loan is approved, the SBA guarantees a share of it: up to 85% on 7(a) loans of $150,000 or less and 75% above that, and 50% on SBA Express loans. That guarantee is why an SBA loan can run 10 years or more at a capped rate when the same lender would not make the loan on its own.
The basic 7(a) eligibility rules are short. The business must be operating, run for profit, be located in the U.S., be small under SBA size standards and not be an ineligible type of business. It must also be unable to get the credit on reasonable terms from non-government sources, and be creditworthy with a reasonable ability to repay.
The 4 main programs
| Program | Maximum | SBA role | Main uses | Maximum term |
|---|---|---|---|---|
| Standard 7(a) | $5 million | 75% guaranty | Working capital, equipment, real estate, refinancing, buying a business | 10 years; 25 for real estate |
| 7(a) small | $350,000 | 85% guaranty up to $150,000; 75% above | Same as standard 7(a) | Same as standard 7(a) |
| SBA Express | $500,000 | 50% guaranty | Term loans and revolving lines; the lender makes the credit decision | Revolving lines up to 10 years |
| 504 | $5.5 million | Works through a Certified Development Company | Buildings, land and machinery with at least 10 years of useful life | 10, 20 or 25 years |
| Microloan | $50,000 | Lends through nonprofit intermediaries | Working capital, inventory, supplies, furniture, equipment | 7 years |
A typical 504 project splits 3 ways: a private lender covers up to 50% of the cost, the Certified Development Company up to 40%, and you put in at least 10%. 504 loans cannot fund working capital or inventory. Microloans average about $13,000, generally carry rates of 8% to 13%, and cannot pay existing debts or buy real estate. A 7(a) Working Capital Pilot also offers loans of up to $5 million with maturities of up to 60 months.
Maximum 7(a) rates in September 2026
| Loan size | Maximum variable rate | With prime at 7.00% |
|---|---|---|
| $50,000 or less | Base rate + 6.5% | 13.50% |
| $50,001 to $250,000 | Base rate + 6.0% | 13.00% |
| $250,001 to $350,000 | Base rate + 4.5% | 11.50% |
| Over $350,000 | Base rate + 3.0% | 10.00% |
The prime rate was 7.00% in the Federal Reserve's H.15 release for the week ending September 28, 2026. The SBA also allows an optional peg rate as the base and publishes separate fixed-rate maximums each month. 504 loans carry fixed rates, pegged to an increment above the market rate for 10-year U.S. Treasury issues.
Fees on loans approved from October 1, 2026
- Maturity over 12 months: 2% of the guaranteed portion on loans of $150,000 or less; 3% on $150,001 to $700,000; 3.5% of the guaranteed portion up to $1 million plus 3.75% of any guaranteed portion above $1 million on larger loans.
- Maturity of 12 months or less: 0.25% of the guaranteed portion.
- Waivers: 0% on loans of $700,000 or less to manufacturers (NAICS 31 to 33), certain food supply chain businesses and businesses in rural areas; 0% on SBA Express loans to veteran-owned businesses.
- Annual service fee: 0.55% of the guaranteed portion outstanding. The lender pays it and cannot charge it to you.
Lenders may pass the upfront guaranty fee on to you. On a $500,000 7(a) loan with a 75% guarantee, the fee is 3% of $375,000, or $11,250. The rates apply to loans that receive an SBA loan number on or after October 1, 2026.
The 2025 and 2026 rule changes
- Smaller small loans. The 7(a) small loan ceiling fell from $500,000 to $350,000, and the minimum FICO SBSS score for that expedited process rose from 155 to 165.
- Equity injection. A minimum 10% equity injection returned for startups and complete changes of ownership. A seller note can cover at most half of it, and only if it is on full standby for the life of the SBA loan.
- Ownership. Since March 1, 2026, SBA Policy Notice 5000-876441 has required that 100% of an applicant's direct and indirect owners be U.S. citizens or U.S. nationals whose principal residence is in the United States. Lawful permanent residents can no longer own any share.
- No MCA refinancing. Merchant cash advances and factoring agreements are not eligible for refinancing with 7(a) loan proceeds.
- SOP 50 10 8.1. Technical updates take effect for loans numbered on or after October 1, 2026. SBA lending trainers report it adds a narrow path for MCA debt that has been converted into qualifying term financing, while active MCAs and factoring agreements stay ineligible. Ask your lender how it applies to you.
Some rules did not change. Owners of 20% or more generally must personally guarantee a 7(a) loan. The SBA does not require collateral on 7(a) small loans of $50,000 or less, and for $50,001 to $500,000 a lender follows its own collateral policy but may not decline a loan solely for inadequate collateral.
How long an SBA loan takes
Most of the time goes into the lender's work: collecting tax returns, financial statements and a debt schedule, verifying them, ordering appraisals for real estate and, for startups and acquisitions, reviewing the business plan and the equity injection. Lenders with delegated authority can approve loans without sending them to the SBA for a credit decision, and on SBA Express loans the lender makes the credit decision itself. Have your documents ready before you apply; our checklist of documents needed for business funding covers the usual list.
When an SBA loan beats fast money
Worked example: $150,000 of working capital.
- 7(a) small loan over 10 years at the maximum variable rate for its size, 13.00% with prime at 7.00%: $2,239.66 a month and $19,044.25 of interest in the first year. Upfront guaranty fee: 2% of the $127,500 guaranteed portion, or $2,550. With the fee paid from the loan, the APR is about 13.4%.
- MCA of $150,000 at a factor rate of 1.35 over 12 months: $803.57 per business day, about $16,875 a month, and a cost of $52,500. Estimated APR about 63%.
The 7(a) figures use the rate cap; a lender can charge less, and a variable rate can move. They are an illustration, not a quote.
The payment is the bigger story. $2,239.66 a month fits inside a business that $16,875 a month would strain. If an SBA loan is realistic within your timeline, it is usually worth the paperwork. Model the payment in our loan calculator.
How to bridge while you wait
- Tell your SBA lender first. Any new debt changes the debt schedule and the cash-flow analysis it is underwriting.
- Treat an MCA as the last resort. Its daily debits cut the cash flow the lender measures, and 7(a) proceeds generally cannot pay it off.
- Prefer a bridge the lender can see around. A short line of credit, equipment financing tied to one asset, or a vendor's extended terms are easier to explain, if your lender agrees.
- Ask about SBA Express. Because the lender makes the credit decision, ask whether an Express loan of up to $500,000 can cover the need sooner.
Openbook Capital compares offers from third-party funders and shows each one with its full cost. If a short bridge makes sense, compare it against what waiting would cost, and against how an MCA and a loan differ, before you sign anything.
Questions
What credit score do I need for an SBA loan?
The SBA scores 7(a) small loans with the FICO SBSS, and SOP 50 10 8 set a minimum of 165 for that expedited process. Lenders set their own personal credit standards on top; South End Capital, for example, publishes a 650 minimum for its SBA loans.
Can I use an SBA loan to pay off a merchant cash advance?
Generally not with 7(a) proceeds, under SBA rules in effect since June 1, 2025. SOP 50 10 8.1, effective October 1, 2026, is reported to open a narrow path for MCA debt first converted to qualifying term financing, so ask your SBA lender.
What fees come with an SBA 7(a) loan?
An upfront guaranty fee of 2% to 3.75% of the guaranteed portion for FY2027, which the lender may pass on to you, plus the lender's own closing costs. The 0.55% annual service fee is paid by the lender and cannot be charged to you.
Do I need collateral for an SBA loan?
The SBA does not require collateral on 7(a) small loans of $50,000 or less. Above that, lenders follow their own collateral policies, but for loans up to $500,000 they may not decline solely for inadequate collateral. Owners of 20% or more generally must guarantee the loan.
Have an offer on the table?
Decode it before you sign, or let us bring back offers from funders that fit, each with its full cost.
Sources
- 7(a) loan program: terms, conditions and eligibility — U.S. Small Business Administration (checked 2026-09-30)
- Types of 7(a) loans — U.S. Small Business Administration (checked 2026-09-30)
- 7(a) loans — U.S. Small Business Administration (checked 2026-09-30)
- 504 loans — U.S. Small Business Administration (checked 2026-09-30)
- Microloans — U.S. Small Business Administration (checked 2026-09-30)
- Information Notice 5000-881797: FY 2027 7(a) program fees — U.S. Small Business Administration (checked 2026-09-30)
- SBA issues notices announcing FY 2027 7(a) and 504 loan program fees — National Association of Government Guaranteed Lenders (checked 2026-09-30)
- SOP 50 10: Lender and development company loan programs — U.S. Small Business Administration (checked 2026-09-30)
- Client alert: SBA issues SOP 50 10 8, key changes impacting SBA 7(a) lending — Whiteford, Taylor & Preston LLP (checked 2026-09-30)
- Key updates in the SBA's revised standard operating procedures — Byline Bank (checked 2026-09-30)
- Notice further revising SBA loan citizenship and residency requirements — National Association of Government Guaranteed Lenders (checked 2026-09-30)
- SBA debt refinancing under SOP 50 10 8.1: new PLP authority, same-institution debt and merchant cash advance rules effective October 1 — Coleman Report (checked 2026-09-30)
- 13 CFR § 120.160, loan conditions (personal guarantees) — Legal Information Institute, Cornell Law School (checked 2026-09-30)
- Selected interest rates (daily), H.15 — Board of Governors of the Federal Reserve System (checked 2026-09-30)
- Programs — South End Capital (checked 2026-09-30)
This guide is general information, not legal, tax or financial advice. Figures are examples worked with the method in our disclosures.