How the guarantee actually works
A bank, credit union, or non-bank lender underwrites and funds the loan. The SBA agrees to reimburse the lender for a share of the loss if the borrower defaults - commonly 75% on loans above $150,000 and 85% at or below it. The borrower still owes the full balance; the guarantee protects the lender, not the borrower. This is the most widely misunderstood feature of the programme.
Because the government absorbs part of the downside, lenders will accept longer terms and lighter collateral than a conventional commercial loan. That is the economic point of the programme, and it is why a 7(a) loan is usually the cheapest capital a small business without hard assets can access.
What it can be used for
Working capital, equipment, inventory, refinancing certain existing business debt, buying an existing business, buying out a partner, and owner-occupied commercial real estate. The proceeds must serve a business purpose, and the business must be for-profit, operating in the United States, and meet the SBA's size standards for its industry.
Ineligible uses are narrower than most people expect but they are absolute: passive real estate investment, lending or investment businesses, gambling, and any purpose that would repay an owner's personal debt.
What it costs
Interest is negotiated between borrower and lender but capped by the SBA against a base rate, most often the prime rate. The maximum spread over prime is tiered by loan size and term - smaller loans carry a wider permitted spread, because the fixed cost of underwriting a $50,000 loan and a $2,000,000 loan is not very different.
There is also an SBA guarantee fee, charged as a percentage of the guaranteed portion and scaled by loan size and maturity, plus ordinary closing costs. Guarantee fees change with each fiscal year's appropriations; confirm the current schedule with the lender rather than relying on any figure published online, including here.
How long it takes
Thirty to ninety days is typical, driven far more by document collection than by the SBA itself. Lenders with Preferred Lender Program (PLP) authority make the credit decision themselves rather than submitting to the SBA for review, which removes a meaningful step. Our lender pages show which processing methods each lender actually used.
The practical bottleneck is almost always the borrower: three years of business and personal tax returns, interim financials, a debt schedule, and - for an acquisition - the target's books.
Commonly used for
- Buying an existing business or a partner's stake
- Owner-occupied commercial real estate where 25-year money matters
- Businesses with good cash flow but thin collateral
- Refinancing expensive short-term debt into a long amortisation
What to check before signing
- A personal guarantee from every owner of 20% or more is standard, not negotiable at most lenders
- The SBA will take a lien on available business and often personal assets, including a home in some cases
- Prepayment penalties apply on loans with terms of 15 years or more, for the first three years
- Rates on most 7(a) loans are variable and reset with prime, so payments move
What the record shows
Real SBA numbers, not estimates
Every figure below is computed from the SBA's own loan-level file rather than from a lender's marketing.
Loans since FY2010
1,052,071
Median approval
$180,000
Median 7(a) rate
6.75%
Median term
10 yr
Source: U.S. Small Business Administration, SBA 7(a) and 504 FOIA data, as of 2026-06-30. Approvals from FY2010 onward. How we calculate this.
| Largest SBA lenders | Approved | Loans | Median loan |
|---|---|---|---|
| Live Oak Banking Company | $23.10B | 17,770 | $850,000 |
| The Huntington National Bank | $19.51B | 82,278 | $60,700 |
| Wells Fargo Bank | $17.43B | 56,773 | $25,000 |
| U.S. Bank | $10.67B | 43,737 | $40,000 |
| JPMorgan Chase Bank | $8.49B | 44,082 | $95,000 |
SBA 7(a): common questions
- Does the SBA lend the money?
- No. A bank or approved non-bank lender makes and funds the loan. The SBA guarantees a portion of the lender's loss if the loan defaults. You apply to the lender, not to the SBA.
- What credit score do SBA 7(a) lenders look for?
- The SBA does not set a minimum score. Lenders set their own, and published thresholds commonly sit in the high 600s, though a strong business with collateral or an experienced buyer can clear a lower one. Since FY2010, the SBA has also used an internal small business scoring model for smaller loans.
- How much of a down payment is required?
- For a business acquisition or a change of ownership, lenders typically require an equity injection of at least 10% of total project cost, and the SBA's rules constrain how much of that can be borrowed. For working capital there may be no down payment at all.
- Can a startup get an SBA 7(a) loan?
- Yes, and roughly one in nine SBA approvals since FY2010 went to a business the SBA classified as new rather than existing. Startups generally face a larger equity injection requirement and closer scrutiny of the owner's industry experience.