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How Much Is a Small Business Loan?




When it comes down to it, business loan costs depend on a number of factors—the loan amount, the interest rate, the repayment schedule—and of course, the type of loan product and the lender.

This being said, however, a small business loan amount from an online lender can range from as low as $2,500 to as high as $500,000. Interest rates can range as well—from as low as 7% to as high as 80%. Therefore, the amount of financing you qualify for and the amount it ultimately costs truly depends on what kind of business loan you’re applying to and how qualified your business is.

So, how much is a small business loan really? Which ones are most affordable, and which ones should you try to avoid if possible?

In this guide, we’ll explain how much a business loan costs—discuss the factors that go into the overall cost of a loan, as well as break down typical costs product by product.

How much is a small business loan? | Costs summarized

Of all the factors that go into determining the overall cost of a small business loan, one of the biggest factors is the type of business loan you’re talking about.

From traditional term loans to merchant cash advances, there are a variety of ways to finance your business. For an overview, you can refer to the cost chart below to find out exactly how much a small business loan will cost, product by product.


Cost Range (APR)


Repayment Frequency


Five to 25 years


Medium-term loans


One to five years

Bi-monthly or monthly

Business lines of credit


Six months to five years

Weekly, bi-monthly, or monthly

Short-term loans

10% to 110%

Three to 18 months

Daily or weekly

Invoice financing

10% to 65%

As long as it takes your customer to pay the invoice

Invoice financing company collects the fees you owe once your customer pays the invoice

Equipment financing


One to five years


Merchant cash advances (MCAs)

40% to 350%

Automatically deducted through your merchant account until you’ve repaid in full

Daily or weekly

What determines the cost of a business loan?

In order to truly answer the question, “how much is a business loan,” it’s important to understand the different cost factors that contribute to the overall cost of a financial product.

Of course, as we mentioned above, the type of financial product you choose will play a role in cost; however, other factors—namely interest rates and fees—will play a significant role as well.

After all, if you’re looking for a $50,000 loan, the total cost will be much higher if your interest rate is 20% than if it’s 7%.

This being said, these cost factors will vary both based on your business’s qualifications—i.e., the better your qualifications, the lower your interest rate will be—as well as the way the lender operates—i.e., some lenders are more likely to charge higher interest rates or additional fees.

With this in mind, let’s break down the most common factors and how they contribute to the overall cost of business financing.

Interest rates

As we mentioned, interest rate is one of the most influential factors in the overall cost of a business loan.

The interest rate you receive will depend on the type of product, lender, and your business’s qualifications. Again, as we mentioned, the lower the interest rate, the lower the cost of the loan.

This being said, however, it’s important to note that not all business loan interest rates are quoted the same way—with the most notable difference between a simple interest rate and APR.

A simple interest rate is the amount (expressed as a percentage) that a lender will charge on the principal (the loan amount) for your use of the funds. In contrast to APR, a simple interest rate only represents the amount you’ll be charged for borrowing the capital—it does not include any other fees a lender might charge (which will explain in more detail below).

Therefore, because an APR incorporates simple interest as well as additional fees, this percentage is a much more accurate reflection of how much a business loan will actually cost you.


Depending on the lender you’re working with and the type of business loan you’re applying to, you might face a variety of different fees on top of your simple interest rate.

A lender might charge:

  • Documentation fees

  • Origination fees

  • Loan processing fees

  • Late payment fees

  • Account maintenance fees

  • Guarantee fees

  • Closing fees

  • Prepayment penalties

These fees can range from as little as 1% of the loan amount to as high as 5% or more.

Overall, these fees can significantly increase the total cost of your business loan—which, once again, is why it’s important to distinguish a simple business loan interest rate from its APR. The APR will show a clearer picture of how much the business loan will actually cost you.

How much is an SBA loan?

Now that you have a better sense of the factors that contribute to business loan costs, let’s explore the typical costs of different loan products.

Starting with one of the most affordable loan products out there, the rate on an SBA loan typically ranges from 7% to 8% APR.

Why is the APR on these loans so low?

In short, SBA loans are so affordable for two major reasons: First, they’re loans issued from a bank—and bank loans are some of the most affordable financing products available. Second, the SBA’s guarantee on the loan encourages bank lenders to lend to small businesses at lower interest rates (because they have less risk in doing so).

SBA loan rates

When it comes down to it, the cost of an SBA loan is made up of a few different elements.

First, the SBA loan rate you receive is determined by the current prime rate, plus an allowable spread of rates that is designated by the bank lender you’re working with. However, that bank is subject to a maximum rate they’re allowed to charge on top of the prime rate.

For the SBA’s most popular loan product, the 7(a) loan, a lender can charge no more than 2.25% on top of the prime rate for loans with terms of less than seven years. For 7(a) loans with terms longer than seven years, the most a lender can charge on top of the prime rate is 2.75%.

This being said, however, the reason SBA loans generally have a 7% to 8% APR (not just around 6.5%), is because the SBA does charge at least one fee for guaranteeing the loan that’s usually passed onto the borrower.

The actual percentage that you’re charged in an SBA guarantee fee depends on the loan’s maturity and the amount the SBA actually guarantees. If your SBA loan is less than $150,000, you won’t have to pay a guarantee fee.

For an SBA loan that’s more than $150,000, with a maturity of one year or shorter, the guarantee fee will be 0.25% of the portion guaranteed. Loans between $150,000 and $700,000 with terms of more than one year will have a guarantee fee of 3% of the guaranteed portion. Finally, SBA loans of $700,000 or more will have a guarantee fee of 3.5% of the guaranteed portion.

All in all, therefore, when it comes to the APR of SBA loans, you’ll typically see about 7% to 8%. This, of course, can vary based on the SBA loan program, your lender, and your business’s qualifications.

How much is a medium-term loan?

Overall, a medium-term loan from an online lender ranges from 8% to 30% APR.

Luckily, when it comes to the cost of this type of business term loan, things are pretty straightforward.

In almost every case, a medium-term loan will come with a fixed interest rate that gets charged on the principal of the loan amount. Additionally, with most medium-term loans, you’ll pay the lender back with fixed monthly payments.

Your repayment to the medium-term lender will, again, not only include interest repayments but also any fees the lender charges.

Medium-term loans from online lenders are, in structure, most comparable to traditional term loans you get from a bank. The rates on a medium-term loan, however, are a little higher than what you’d find at a bank.

Medium-term loan rates

Although medium-term loans are some of the most affordable financing products on the market, they’re still a little more expensive than what you’d find at a bank or with an SBA loan.

This is largely due to two factors.

First, whereas banks have notoriously tight credit for small business owners (only lending to the most qualified borrowers), online lenders offering medium-term loans will work with less-qualified borrowers.

Therefore, because medium-term lenders will work with slightly less qualified borrowers, they’ll charge a slightly higher interest rate. This slight increase in what they charge in interest rate compensates for the fact that they’re lending to riskier borrowers.

In the absolute worst case you can’t pay back your loan, the lender has already gotten a fair amount of the money they lent back from the higher interest payments.

Additionally, another reason why medium-term loans have slightly higher rates is due to the time it takes for a medium-term lender to fund your loan.

Whereas a bank takes a long time to fund (a few weeks to a few months), online or alternative lenders use technology to fund loans much more quickly—sometimes within a few days. As you might expect, you pay for this speed with higher interest rates on the loan.

How much is a business line of credit?

The wide range of costs for business lines of credit comes from the fact that there are two variations on a general business line of credit: a short-term line of credit and a medium-term line of credit.

Like medium-term loans and short-term loans, medium-term lines of credit typically have repayment periods of 12 to 18 months or longer, whereas short-term lines of credit have repayment periods of less than a year.

Business line of credit rates

This being said, as you might expect, medium-term lines of credit are comparable to medium-term business loans in that they’ll have large capital amounts, a lower interest rate (starting at 8% APR), and a slightly longer time to funding.

Short-term lines of credit, on the other hand, are like short-term loans in that they offer fast, more accessible capital, but they’ll come with higher interest rates (up to 80% APR for short-term lines of credit)

Additionally, it’s worth noting that the rates you see for a business line of credit don’t function exactly the same as a term loan. Whereas you’re charged interest on the total loan amount with a term loan, you’re only charged interest on the funds that you draw from your business line of credit.

Similarly, you might see slightly different fees included in the cost of a line of credit. Some lenders charge a draw fee every time you draw on your credit line, some charge a penalty fee if you don’t draw from your line within a certain period of time, and some charge monthly fees to keep your account active.

How much is a short-term loan?

As we briefly mentioned above, short-term loans are more costly than their medium- or longer-term counterparts. Rates for these loans start at around 10% APR, but they can reach triple digits.

Overall, the reasons that short-term loans can become so expensive are similar to why medium-term loans are more expensive than bank loans.

First, like medium-term lenders, short-term, online lenders are more likely to work with less qualified borrowers and they justify this risk with higher interest rates. Additionally, short-term loans are typically one of the fastest forms of financing—and as we mentioned, the faster a product is to fund, the more expensive it’s likely to be.

Short-term loan rates

Ultimately, short-term loan rates will be quoted much in the same way as any other term loan.

On the other hand, these loans must be paid back over a much shorter time frame (anywhere from three to 18 months) with either daily or weekly payments. This shorter term means that each payment will be sizable in comparison to those that you’ll find with an SBA or long-term loan.

Moreover, it’s worth mentioning that, although many short-term loans will be quoted with simple interest rates or APR, some lenders quote the cost of the loan as a factor rate (like 1.2).

This being said, a factor rate is simply a multiplier that tells you the total amount you’ll pay the lender back. As an example, say you were quoted a factor rate of 1.35 on a $10,000 short-term loan over a 12-month term. The total amount you’d repay, therefore, is $13,500 ($10,000 x 1.35).

In this case, although it looks like your interest rate is 35%, factor rates do not convert to interest rates in this way.

With interest, the cost is 35% of the total loan amount—but with factor rates, all of the interest is charged to the principal when the loan or advance is originated—unlike a loan quoted with APR, where interest accrues on the principal amount as it gets smaller and smaller as more payments are made.

How much is invoice financing?

At the end of the day, the cost of invoice financing comes out to about a 10% to 65% APR. However, there are nuances to the cost structure of this financing product.

Here’s how it works:

With invoice financing, an invoice financing or factoring company advances you a percentage of the value of your outstanding invoice—usually around 85%.

As an example, therefore, let’s say you have a $100,000 outstanding invoice.

The financing company will advance you $85,000, holding the remaining $15,000 in reserve. Some invoice financing companies will charge a processing fee (usually around 3%) on the reserve amount right away.

Now, you wait for your customer to pay their invoice (while you use the advanced cash for your business). Every week that it takes your customer to pay their invoice, the invoice financing company will charge what’s usually called a “factor fee” on the reserve they’re holding—in this case, the $15,000 reserve.

So, say your customer pays the invoice in two weeks, and the invoice factoring company was charging a 1% factor fee each week. In this example, they will then take 2% of the total invoice amount, or $2,000, in factor fees. When you get the remaining reserve back, you’ll end up with $10,000 after the company takes the 2% in factor fees and 3% in a processing fee.

In this way, the cost of invoice financing is simply a convenience cost you need to pay in exchange for the advance of capital you’re receiving.

How much is equipment financing?

With equipment financing, like invoice financing, you’re receiving capital for a specific purpose—to purchase equipment.

In this case, because an equipment financing company is loaning you money to purchase the equipment, you’ll be paying more to finance that equipment than you would be if you were to pay for it out of pocket. The tradeoff makes sense, however, if you can’t afford that kind of large expense or don’t want to deplete your cash storage with such a large purchase.

This being said, the APR range on equipment financing varies from 8% to 30%, with your actual rate depending on the equipment you’re buying and your qualifications.

Other than that, the cost structure of equipment financing is pretty straightforward—mirroring that of a traditional term loan.

As an example, say an equipment financing company offers you an equipment loan of $10,000 at a rate of 12% over a three-year term.

With a 12% APR, your $10,000 piece of equipment will end up costing you $11,957.15 all together (with monthly payments of $332.14).

How much is a merchant cash advance?

Finally, of all the business loan products we’ve discussed, the merchant cash advance (MCA) will be the most expensive.

APRs for a merchant cash advance can reach as high as triple digits—and therefore, you should consider any and all options you have before opting for an MCA.

Merchant cash advances are often so expensive because these companies work with less qualified borrowers and charge a factor rate—which can be misleading when it comes to the total cost.

Let’s consider an example:

Say you’re advanced $40,000 with a factor rate of 1.20.

Using your factor rate formula, take $40,000 multiplied by 1.20—$4,800. This amount is what you’ll pay the merchant cash advance company back by allowing them to take a fixed percentage of your daily credit card sales.

This is where factor rates can be confusing—at first glance, you might think that your interest rate is 20%—but you have to convert the factor rate into APR.

Say that, in this example, you’re allowing the merchant cash advance company to take 20% of your future credit card sales, and you expect to bring in $45,000 a month in credit card transactions.

This being said, you’d repay your merchant cash advance in 160 days with daily payments of $300—meaning, at the end of the day, your merchant cash advance held a steep 85.43% APR.

Therefore, once again, merchant cash advances should be a last resort when it comes to business financing. Along these lines, before you take on an MCA, you’ll want to use a merchant cash advance calculator to determine how much this loan product will actually cost and whether or not your business can afford it.

The bottom line

As you can see, the answer to “how much is a small business loan” varies based on the type of financing product—among other factors.

Although we’ve listed the APR ranges you’re most likely to see, the APR you’re quoted at will depend on the lender you’re working with, as well as your business’s qualifications.

Ultimately, when you’re looking for debt financing, you want to ensure that you understand any and all costs that your business will face through the borrowing process. In this way, the right loan product for your business is not only the one that will best meet your needs but also one that you can afford.

Therefore, you’ll always want to compare different options to make sure you’re getting the lowest rate possible on your financing.


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How to Get a Loan to Buy a Business



Not everyone wants to take on the challenge of building a business from the ground up. An attractive alternative can be to step into a business that’s already up and running by purchasing it from the current owner. Some advantages of buying a business may include easier financing, an established customer base and an existing cash flow.

Buying a business is different from buying a franchise. Franchises have a set business model that’s proven to work. However, when you buy an independently operated business, it’s important to show the lender that you, your previous business experience and the business you want to buy are a winning combination.

What lenders look at when you want to buy a business

Because lenders can view the performance record of an existing business, it’s typically easier to get a loan to purchase an existing business compared with startup funding. However, your personal credit history, experience and details about the acquisition business still matter.

Your personal credit and experience

Through credit reports and credit scores, lenders are able to assess how you’ve managed debt in the past and potentially gain insights into how you will handle it in the future. Your education and experience will also be evaluated.

Solid credit history: Lenders look to see if you have a history of paying your debts. Foreclosures, bankruptcies, repossessions, charge-offs and other situations where you haven’t paid off the full amount will be noted.

Business experience: Having worked in the same industry as the business you want to purchase is helpful. Related education can also be viewed as a positive.

Other businesses you’ve owned

Having a track record of operating other successful businesses can have a positive influence on lenders when it comes to buying a new operation.

Record of generating revenue: Business financial statements can help a lender document that your current or past businesses were well-managed and turned a profit.

Positive credit record: Lenders review business credit scores and reports to verify creditworthiness and to identify liens, foreclosures, bankruptcies and late payments associated with your other businesses.

The business you want to buy

Just because a business is operating doesn’t mean it’s a good investment. Lenders will ask for documentation, often provided by the current owner, to assess the health of the operation.

Value of the business: Like you, your lender will want to ensure that you’re buying a business that has value and that you’re paying a fair price.

Past-due debts: Lenders will be interested in the business’s past-due debts, which may include liens, various types of taxes, utility bills and collection accounts.


Most lenders will let you know what they want included in the loan application package, but there are some personal documents that are typically requested, as well as ones related to the business you want to purchase.

Personal documents

The following documents are used to evaluate your personal finances, business history and plans for operating the business after its purchase:

  • Personal tax returns.

  • Personal bank statements.

  • Financial statements for any of your other businesses.

  • Letter of intent.

Business documents

Documents from the current business owner will also be evaluated. Some common ones requested by lenders include:

  • Business tax returns.

  • Profit and loss, or P&L, statements.

  • Business balance sheet.

  • Proposed bill of sale.

  • Asking price for inventory, machinery, equipment, furniture and other items included in the sale.

Where to get a loan to buy a business

Compared with finding a loan to start a business, getting funding to buy an existing business may be easier. Here are three popular funding options to check into for a business loan:

Bank loans

Banks generally offer the lowest interest rates and best terms for business loans. To qualify for this type of loan, you’ll typically need a strong credit history, plus the existing business will need to be in operation for a certain minimum of years and generate a minimum annual revenue amount set by the lender.

SBA loans

If borrowers don’t qualify for a traditional bank loan, then SBA loans, ones partially guaranteed by the Small Business Administration, may be the next option to explore. Because there is less risk to the lender, these loans can be easier to qualify for. Banks and credit unions frequently offer SBA loans in addition to traditional bank loans.

Online business loans

Another option to consider is online business loans. Online business loans may offer more flexibility when it comes to qualification, compared with bank and SBA loans. Minimum credit score requirements can be as low as 600, and in a few cases lower. Generally, interest rates are higher than what’s available with a traditional bank loan.


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Accounts Receivable Financing: Best Options, How It Works



Accounts receivable financing, also known as invoice financing, allows businesses to borrow capital against the value of their accounts receivable — in other words, their unpaid invoices. A lender advances a portion of the business’s outstanding invoices, in the form of a loan or line of credit, and the invoices serve as collateral on the financing.

Accounts receivable, or AR, financing can be a good option if you need funding fast for situations such as covering cash flow gaps or paying for short-term expenses. Because AR financing is self-securing, it can also be a good choice if you can’t qualify for other small-business loans.

Here’s what you need to know about how accounts receivable financing works and some of the best options for small businesses.

How Much Do You Need?

with Fundera by NerdWallet

How does accounts receivable financing work?

With accounts receivable financing, a lender advances you a percentage of the value of your receivables, potentially as much as 90%. When a customer pays their invoice, you receive the remaining percentage, minus the lender’s fees.

Accounts receivable financing fees are typically charged as a flat percentage of the invoice value, and generally range from 1% to 5%. The amount you pay in fees is based on how long it takes your customer to pay their invoice.

Here’s a breakdown of how the process works:

  1. You apply for and receive financing. Say you decide to finance a $50,000 invoice with 60-day repayment terms. You apply for accounts receivable financing and the lender approves you for an advance of 80% ($40,000).

  2. You use the funds and the lender charges fees. After receiving the financing, you use it to pay for business expenses. During this time, the lender charges a 3% fee for each week it takes your customer to pay the invoice.

  3. You collect payment from your customer. Your customer pays their invoice after three weeks. You owe the lender a $4,500 fee: 3% of the total invoice amount of $50,000 ($1,500) for each week.

  4. You repay the lender. Now that your customer has paid you, you’ll keep $5,500 and repay the lender the original advance amount, plus fees, $44,500. You paid a total of $4,500 in fees, which calculates to an approximate annual percentage rate of 65.7%.

Because accounts receivable financing companies don’t charge traditional interest, it’s important to calculate your fees into an APR to understand the true cost of borrowing. APRs on accounts receivable financing can reach as high as 79%.

Accounts receivable financing vs. factoring

Accounts receivable financing is often confused with accounts receivable factoring, which is also referred to as invoice factoring. Although AR financing and factoring are similar, there are differences.

With invoice factoring, you sell your outstanding receivables to a factoring company at a discount. The factoring company pays you a percentage of the invoice’s value, then collects payment directly from your customer. When your customer pays, the factoring company gives you the rest of the money you’re owed, minus its fees.

With accounts receivable financing, on the other hand, your invoices serve as collateral on your financing. You retain control of your receivables at all times and collect repayment from your customers. After your customer has paid their invoice, you repay what you borrowed from the lender, plus the agreed-upon fees.

Invoice factoring can be a good financing option if you don’t mind giving up control of your invoices and you can trust a factoring company to professionally collect customer payments. If you’d rather maintain control of your invoices and work directly with your customers, AR financing is likely a better option.

Best accounts receivable financing options

Accounts receivable financing is usually offered by online lenders and fintech companies, many of which specialize in this type of business funding. Certain banks offer AR financing as well.

If you’re looking for a place to start your search, here are a few of the best accounts receivable financing companies to consider.


A division of the Southern Bank Company, altLINE is a lender that specializes in AR financing. AltLINE offers both accounts receivable financing and invoice factoring, working with small businesses in a variety of industries, including startups and those that can’t qualify for traditional loans.

AltLINE offers advances of up to 90% of the value of your invoices with fees starting at 0.50%. To get a free quote from altLINE, call a representative or fill out a brief application on the lender’s website. If you apply online, a representative will contact you within 24 hours.

AltLINE’s website also contains a range of articles for small-business owners, covering AR and invoice financing, payroll funding, cash flow management and more. AltLINE is accredited by the Better Business Bureau and is rated 4.7 out of 5 stars on Trustpilot.

1st Commercial Credit

1st Commercial Credit offers accounts receivable financing in addition to other forms of asset-based lending, such as invoice factoring, equipment financing and purchase order financing. The company works with small and medium-sized businesses, including startups and businesses with bad credit.

With 1st Commercial Credit, you can finance $10,000 to $10 million in receivables with fees ranging from 0.69% to 1.59%. You can start the application process by calling a sales representative or filling out a free quote form on the company’s website. After your application is approved, it typically takes three to five business days to set up your account, then you can receive funds within 24 hours.

1st Commercial Credit is accredited by the Better Business Bureau and has an A+ rating.

Porter Capital

Porter Capital is an alternative lender specializing in invoice factoring and accounts receivable financing. The company also has a special division, Porter Freight Funding, which is dedicated to working with businesses in the transportation industry.

With Porter Capital, you can receive an advance of 70% to 90% of your receivables and work with an account manager to customize a financing agreement that’s unique to your business. Porter funds startups and established businesses, offering fees as low as 0.75% monthly.

You can provide basic information about your business to get a free quote and receive funding in as little as 24 hours. Although Porter Capital isn’t accredited by the Better Business Bureau, it does have an A+ rating; the company also has 3.7 out of 5 stars on Trustpilot.

Additional options

Although AR financing and factoring are distinct, many companies blur the lines between the two. As you compare options, make sure you understand the type of financing a lender offers.

If you decide that invoice factoring may be a fit for your business, you might consider companies like FundThrough, Triumph Business Capital or RTS Financial.

Find and compare small-business loans

If accounts receivable financing isn’t right for you, check out NerdWallet’s list of the best small-business loans for business owners.

Our recommendations are based on the market scope and track record of lenders, the needs of business owners, and an analysis of rates and other factors, so you can make the right financing decision.


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Finance & Accounting

SBA Loan Collateral vs. Guarantee: What’s the Difference?



Personal guarantees and collateral are both ways of promising a lender that you’ll make good on your debt. You may have to offer both to get an SBA loan.

Collateral ties a loan to a specific asset, like your business’s inventory or your home, which the lender can seize if your business can’t repay the loan. A personal guarantee promises the lender that you will repay the debt using your personal assets, but may not specify how.

In general, SBA lenders require anyone who owns 20% or more of a business to provide a personal guarantee. SBA loans larger than $25,000 usually require collateral, too.

Do SBA loans require a personal guarantee?

SBA loans usually require unlimited personal guarantees from anyone who owns more than 20% of a business. Lenders may ask for limited or unlimited personal guarantees from other business owners, too.

Unlimited personal guarantee: This is a promise that the guarantor (the business owner) will pay back the loan in full if the business is unable to. The lender doesn’t have to seize collateral or seek payment from any other source before going straight to the loan applicant for loan repayment.

Limited personal guarantee: If you own less than 20% of a business, you may have the option to sign a limited personal guarantee instead. The limited personal guarantee caps the amount you’ll have to pay the lender, either as a dollar limit or a percentage of the debt.

Limited personal guarantees can be secured by collateral, which means the lender will seize those assets when they recoup payment instead of asking you to pay back a certain dollar amount.

Who has to personally guarantee an SBA loan?

The SBA requires personal guarantees from:

  • Individuals who own more than 20% of a business.

  • Spouses who own 5% more of the business, if their combined ownership interest is 20% or more.

  • Trusts, if the trust owns 20% or more of the business.

  • Trustors, if a revocable trust owns 20% or more of the business.

SBA lenders may require additional personal guarantees.

Do SBA loans require collateral?

For SBA 7(a) loans of between $25,000 and $350,000, SBA lenders have to follow collateral policies that are similar to the procedures they’ve established for non-SBA loans. Banks and credit unions are usually the intermediary lenders for SBA 7(a) loans.

If you use an SBA loan to finance specific assets, like an equipment purchase, the lender will take a lien on those assets as collateral. The lender may also use your business’s other fixed assets as collateral, and you may have to offer personal assets, too.

For SBA 7(a) loans larger than $350,000, SBA lenders need collateral worth as much as the loan. The lender will start with your business assets. If they need more collateral, the SBA requires them to turn to the real estate you own personally, as long as you have at least 25% equity in the property.

Live Oak Bank is the largest SBA 7(a) lender in the U.S. by volume. Its loans may require collateral in the form of:

  • Personal residences.

  • Retirement accounts.

  • Commercial real estate.

  • Equipment.

  • Commercial vehicles.

  • Accounts receivable.

  • Inventory.

What if I can’t provide collateral or a personal guarantee?

If you’re seeking any type of SBA loan, there’s a good chance you’ll have to provide both collateral and a personal guarantee. Even SBA microloans usually require collateral and a personal guarantee. Without them, you’ll have trouble getting an SBA loan.

Some online lenders offer unsecured business loans, which don’t require collateral. But you may still have to sign a personal guarantee.


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