Since its founding in 1953, the SBA has offered financial support to entrepreneurs. In 2025, these programs continue to thrive, empowering entrepreneurs to secure capital. SBA loans offer countless benefits, including favorable terms and flexible loan structure. While the SBA doesn't directly lend the money, it guarantees a portion of the loan, reducing risk for participating lenders. This guarantee enables businesses to secure financing with more attractive terms than conventional loans. There are various SBA loan programs, each designed for unique business needs. You’ll want to rely on a knowledgeable lender to guide you through the SBA loan process and help you select the most suitable loan for your needs.
Understanding the SBA loan landscape
SBA 7(a) Loans
SBA 7(a) loans are the Small Business Administration's most popular program, designed to help small businesses access capital up to $5 million. 7(a) loans can fund a variety of needs, from startup costs to business expansion or acquisition, and the specific terms are negotiated with an SBA-approved lender like Live Oak Bank. Here’s an overview including key benefits:
Lower Down Payment
Conventional loans often require a 25%-35% down payment. SBA 7(a) loans, focusing on cash flow analysis, typically require less. For new business purchases, the SBA mandates a minimum 10% down payment, though this can vary. This significantly lowers the initial capital needed, making business ownership more accessible.
Supports Various Business Needs:
- Working capital
- Purchasing equipment
- Buying real estate
- Refinancing debt
- Business expansion
Longer Loan Terms: SBA 7(a) loans offer extended repayment periods, averaging 10 to 25 years. Interest rates are determined by the lending institution. The maximum loan amount is $5 million.
Working Capital Inclusion: SBA 7(a) loans allow for the inclusion of working capital, providing a financial safety net during the initial stages of business operation.
Less Restrictive Financial Covenants: Unlike conventional loans, SBA 7(a) loans generally lack stringent financial covenants, such as loan-to-value or debt service coverage ratio requirements.
Live Oak® Express loans
If you need fast funding for your business, Live Oak® Express loans provide quick access to capital, ranging from $10,000 to $500,000. These term loans are ideal for various business needs, including working capital, equipment purchases, debt refinancing, and hiring. Enjoy competitive rates, a streamlined application process, and personalized service. Get a quick decision on your loan application.
SBA 504 loans
The SBA 504 loan program is another government-backed option for businesses purchasing fixed assets like commercial real estate, machinery, and equipment. Unlike the 7(a) loan program, the 504 program involves a unique three-party structure:
- Lender: Provides 50% of the loan.
- Certified Development Company (CDC): Contributes 40%.
- Borrower: Supplies a minimum 10% down payment.
However, the borrower's contribution can increase depending on certain factors. For businesses operating for less than two years, or those acquiring special-purpose properties, they must provide a 15% down payment (50-35-15 structure). For businesses that are both new (less than two years old) and acquiring special-purpose properties are required to provide a 20% down payment (50-30-20 structure).
SBA microloans
SBA microloans offer up to $50,000 (averaging $13,000) to small businesses and eligible non-profit childcare centers for startup and expansion. The SBA funds non-profit, community-based intermediary lenders who then administer these loans, providing both financial support and business guidance to borrowers.
The importance of working with a preferred lender (PLP)
Working with the right lender is crucial for a successful SBA 7(a) loan experience. Choose an SBA Preferred Lender Program (PLP) participant like Live Oak Bank to benefit from their direct decision-making authority – in other words, the bank does not have to get final approval from the SBA. This accelerates the approval process. Look for a lender with a proven track record of empowering small to medium-sized businesses. Their expertise will significantly reduce the time and complexity of your loan application process.
The power of SBA loans in 2025
The SBA, along with Live Oak Bank, remains committed to supporting small businesses. As the economic landscape evolves, SBA loan programs will continue providing entrepreneurs with the financial tools they need to succeed. By understanding the advantages of SBA loans and leaning on the knowledge of qualified PLP lenders, you can position your business for growth in 2025 and beyond.
