How Can I Get An SBA Self-Employed Loan?

Kiah Treece is a small business owner and personal finance expert with experience in loans, business and personal finance, insurance and real estate. Her focus is on demystifying debt to help individuals and business owners take control of their fina.

Kiah Treece Loans Writer

Written By Kiah Treece Loans Writer

Kiah Treece Loans Writer

Loans Writer Jordan Tarver Lead Editor, Mortgages & Loans

Jordan Tarver has spent seven years covering mortgage, personal loan and business loan content for leading financial publications such as Forbes Advisor. He blends knowledge from his bachelor's degree in business finance, his experience as a top perf.

Jordan Tarver Lead Editor, Mortgages & Loans

| Lead Editor, Mortgages & Loans

Updated: Oct 9, 2022, 8:54am

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If you‘re self-employed and need financial assistance, you may be able to qualify for a U.S. Small Business Administration (SBA) loan. These loans can provide much-needed funds at competitive interest rates, but you’ll need to meet eligibility requirements set forth by the SBA and its network of individual lenders.

SBA Microloans

SBA microloans are available through a nationwide network of government-backed nonprofit lending organizations. Microloans can be used for a variety of purposes aimed at rebuilding, reopening, repairing, enhancing or improving a small business. Approved expenditures include working capital, inventory or supplies, furniture, fixtures, machinery and equipment.

The maximum amount you can borrow through an SBA microloan is $50,000, and the maximum repayment period is six years. SBA microloan interest rates range from 8% to 13% as of August 2022.

Because the microloan program is administered by a network of intermediary lenders, the eligibility requirements vary. In general, though, business owner applicants must provide collateral and personally guarantee the loan in addition to demonstrating their qualifications.

SBA 7(a) Small Loans

The SBA 7(a) loan program is the SBA’s flagship—and most popular—loan program. Funds are available up to $5 million and can be used for a variety of purposes, including working capital, equipment purchase and the costs of expanding a business. Business owners can even use proceeds to finance the purchase of real estate.

The interest rate on an SBA 7(a) loan is pegged to a base rate—prime, LIBOR or an optional peg rate—plus 2.25% to 4.75%, depending on the loan amount and term. Loan terms extend up to 15 years for real estate, and 10 years for equipment, working capital and inventory loans.

Eligible borrowers must operate for profit in the U.S. or its territories and demonstrate that they have reasonable owner equity to invest. As with other SBA loans, it also is necessary to use alternative sources of financing (such as personal assets) prior to applying for the government-backed loan.

SBA Express Loans

SBA Express loans fall under the umbrella of the 7(a) program and are available up to $500,000, with a maximum SBA guarantee of 50%. Interest rates are ultimately negotiated by individual lenders and borrowers but cannot exceed the SBA maximum of prime plus 6.5%. Repayment periods extend up to seven years for lines of credit, 25 years for real estate and 10 years for other loans.

Express loans are a great choice for self-employed applicants who need to access cash quickly, as the SBA responds to Express loan applications within 36 hours of receipt. This is substantially faster than the five to 10 business days it takes for 7(a) small loans.

Credit and eligibility decisions are made by individual lenders, so requirements vary. However, borrowers must meet the lender’s credit score, minimum time in business and annual revenue requirements.

How to Apply for an SBA Loan While Self-employed

The process for applying for an SBA loan while self-employed varies by loan program and individual lender. However, there are a few general steps to take when applying for an SBA loan:

Check your credit score. Before applying for an SBA loan, check your personal FICO score and review a credit report from at least one of the major credit bureaus—Equifax, Experian and TransUnion. SBA loans generally require a credit score of at least 680, but lenders impose their own requirements. Understanding your credit profile can help you evaluate your approval odds and give you a chance to improve your score before submitting an application.
Draft a business plan. To qualify for a business loan, you’ll need to create a business plan that demonstrates how your business makes money and how it will use loan proceeds. This is especially important if you have been in business for less than two years.
Determine what kind of SBA loan you need. Visit the SBA website to review the available loan programs. Choose an option with a borrowing limit and approval timeline consistent with your needs. Also review any program-specific requirements to ensure you qualify.
Select a lending partner. Enter your ZIP Code on the SBA’s Lender Match tool to locate a lender in your area. Familiarize yourself with the lending partner’s credit and revenue requirements and application process to confirm your eligibility.
Identify sufficient collateral. Depending on the SBA program and lender, it may be necessary to provide collateral to secure the loan. Compare lenders and programs to determine collateral requirements and take them into consideration when choosing a loan offer.
Gather necessary documentation. The SBA loan application process varies by lender, but applicants are generally required to provide documents such as tax returns, business financial statements, projections and outstanding debts. Streamline the process by compiling these documents before submitting an application.
Submit an application. Once you identify an SBA lending partner and loan program, submit a formal application. A loan officer will contact you via phone or email if additional information or documents are required. Keep an eye out for these communications to avoid delays in loan processing and approval.

Ways to Use SBA Loan Funds

There are a number of ways you can use SBA loan funds to help your business, but permissible uses may be restricted by the specific loan program. Some common uses for SBA loans include:

Purchasing inventory or equipment
Paying for renovations or repairs
Hiring new employees
Paying for marketing or advertising expenses
Expanding your business operations
Buying a new commercial space

Are SBA Loans Hard to Get?

It isn’t difficult to qualify for an SBA loan, but the application, approval and funding processes can be lengthy. This means that self-employed business owners who need access to cash quickly may be better served by an online loan, business credit card or another alternative.

Eligibility Requirements

SBA loan requirements vary by the loan program and individual SBA-approved lenders. However, the SBA imposes some basic eligibility guidelines that all applicants must meet as part of the application process. For example, a business must demonstrate that it is able to make loan payments.

These are the basic eligibility requirements for a business to get an SBA loan:

Must operate for-profit in the U.S. or one of its territories
Owner must have already committed their own time and money to the business
Must have exhausted all other financing options

Alternatives to SBA Loans

If you aren’t approved for a loan, you may still be able to get financing through other sources. SBA loan alternatives often come with higher interest rates or less favorable terms, but they may be easier to qualify for.

Consider these options if an SBA loan isn’t a good fit for your business.

Online Loans

Self-employed business owners can use some personal loans to cover startup or operating expenses or apply for business loans. While these loans are available from banks and lenders, it may be difficult to qualify with a traditional financial institution—and rates and terms are often less competitive than with online options.

Expect to pay anywhere from 4% to 36% annual percentage rate (APR) for an online personal loan with terms extending up to seven years. As always, compare personal loans and the best small business loans before choosing one and prequalify where possible.

Business Credit Cards

Business credit cards are easier to qualify for than SBA loans and come with much faster approval speeds, with consumers often receiving a same-day or even immediate decision. This approach to business financing also can help you build your credit history and make it easier to get approved for future loans.

While credit cards can be a convenient way to pay for small expenses, they typically have high interest rates (around 9% to 27%), so look for one that offers a 0% introductory period.

Personal Savings

If you have money in a savings account, consider using some of it to finance your business. We don’t recommend taking money out of retirement accounts or emergency funds, but using cash can be a good option if you do not have good credit or otherwise struggle to get approved for a loan.

Equity Financing

Self-employed business owners who need access to large sums of cash also may opt for equity financing. This involves selling a portion of your business in exchange for funding. However, this option can be risky because it may involve handing over decision-making to someone outside your organization. For that reason, it should only be considered as a last resort, and you should always have a business attorney review the terms of the agreement.