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An SBA loan is a small-business loan offered by banks and online lenders and partly guaranteed by the government.

SBA loans are small-business loans partially guaranteed by the U.S. Small Business Administration and issued by participating lenders, usually banks.

SBA loans have tight lending standards, but their flexible terms and low-interest rates can make them one of the best ways to finance a business. Here’s what to know about SBA loans, how to apply for one, and how to maximize your chances of approval.

You apply for an SBA loan through a lending institution like a bank or credit union. That lender then applies to the SBA for a loan guarantee, which means if you default on an SBA loan, the government pays the lender the guaranteed amount.

The SBA requires an unconditional personal guarantee from everyone with at least 20% ownership in a company. This guarantee puts you and your personal assets on the hook for payments if your business can’t make them.


To summarize: If you received an Economic Injury Disaster Loan, you are required to pay it back in full. However, if you received your loan during the period when either of the Advance funds were offered and you were approved for either Advance, that portion does not have to be repaid.

According to the SBA, you can use these loans for “most” business purposes, including start-up, expansion, equipment purchases, working capital, inventory or real-estate purchases. SBA loans are secured, meaning, SBA agencies guarantee a percentage of the loan amount to the lender, reducing their risk.

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Understanding SBA Loans

The Small Business Administration is an indispensable resource for business owners in need of financing. In partnership with banks, credit unions, and other financial institutions, the SBA offers low-cost government-backed business loans. SBA loans can be used for most business uses, such as working capital, inventory, equipment, refinancing, and real estate.

SBA loan borrower requirements are difficult to meet, and the application process can be time-consuming. However, for most borrowers, the effort is worth the access to low-cost loans they couldn’t get elsewhere.

Are you eligible for an SBA loan? And which type of loan is right for your business? Keep reading to find out!

What is an Economic Injury Disaster Loan?

Another of the SBA small business loans is the Economic Injury Disaster Loan (EIDL). This loan is offered to businesses in a disaster area that have been negatively impacted by a disaster.
A disaster could be a major storm, flooding, or drought. Or, as we’ve seen recently, it could be a pandemic like COVID-19.
The loan is available to businesses that aren’t able to pay their ordinary and necessary business expenses because of the qualifying disaster, and the funds provide working capital to help them resume business as usual. To qualify, businesses must not be able to get financing elsewhere.
With the COVID-19 EIDL program, borrowers can receive up to $500,000 which can be used for working capital and normal expenses such as rent, utilities, and healthcare benefits.
As of June 10, 2021, more than 3.79 million EIDL loans have been approved by the SBA, with funds totaling over $207 billion.