SBA Loans vs. Term Loans: Compare Business Funding
SBA loans vs. business term loans — the slowest, cheapest business financing vs. the fast alternative. Compare side by side.
SBA Loan: SBA 7(a) and 504 loans are government-backed programs offering some of the lowest rates and longest terms available for qualifying small businesses. Business Term Loan: A business term loan delivers a fixed lump sum repaid over a set schedule with predictable monthly payments — the classic business funding structure.
SBA Loan vs. Business Term Loan — side by side
| SBA Loan | Business Term Loan | |
|---|---|---|
| Typical amount | $50,000 – $5,000,000 | $25,000 – $2,000,000 |
| Typical term | 5 – 25 years | 1 – 10 years |
| Rate | Prime + 2.25% – Prime + 4.75% | 7% – 30% APR |
| Minimum time in business | 2 years | 1 year |
| Minimum credit score | 650+ | 600+ |
Which is right for your business?
- SBA Loan tends to fit best when you need business acquisition or real estate purchase.
- Business Term Loan tends to fit best when you need expansion or equipment.
Frequently asked questions
Can I refinance an alternative term loan with SBA?
Yes — SBA 7(a) loans can refinance existing business debt, including alternative lender term loans, when the existing debt is at unreasonable terms. The business must meet standard SBA criteria at the time of the refinance application.
Are SBA loans fixed or variable rate?
SBA 7(a) loans can be structured as fixed or variable rate (tied to prime + a spread). Fixed-rate SBA loans lock in the rate at origination. In rising rate environments, fixed-rate SBA loans are generally preferred for longer-term financing.
