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NGExpert financial copywriter
Many small businesses use loans through the U.S. Small Business Administration (SBA) to finance their businesses.
SBA loans are popular because they have attractive interest rates and repayment terms, and are guaranteed by the U.S. federal government. While many SBA loans have maximum limits of $5 million or more, most small businesses take out smaller loans. Find out more about the average SBA loan size below.
Page written by Kat Cox. Last reviewed on February 14, 2024. Next review due October 1, 2025.
According to the Federal Reserve, the average small business loan is $663,000. Of course, that’s based on data from 2017. The SBA reports:
While you can get up to $5 million for a standard SBA 7(a) loan, most borrowers in 2022 took out just under a million dollars at $999,210. The average for all SBA 7(a) loans, including the Small Loan and Express programs, was $538,903. Express loans, which are limited to a $500,000 maximum, averaged $97,097 in 2022.
The SBA 7(a) loans are the most popular loans that the SBA administers, and can be used for almost any type of business need, including:
A loan in the SBA 504/CDC program can be up to $5.5 million, but you must be able to prove that you’ll use the loan to create jobs or other economic development in your community. In 2022, the average SBA 504 loan clocked in at $972,506.
SBA 504/CDC loans can be used to fund commercial real estate purchases, improvements on land or existing buildings,
Veterans can qualify for SBA loans, specifically through the SBA 7(a) program. Unfortunately, the SBA doesn’t separate out their loan amounts for loans to veterans, and the average loan amount will depend on what the borrower intends to use the funding for. However, all of those loans are lumped into the overall average amount for all SBA 7(a) loan programs, which averaged $538,903 in 2022.
The SBA doesn’t have a specific program targeted at minority owners, but in 2022, they reported that three-quarters (76%) of SBA microloans were granted to businesses in underserved communities, including minority-owned businesses. They reported that in 2022, the average loan size in the microloan program was $13,000. The maximum loan amount for an SBA microloan is $50,000.
Again, there is no SBA loan specifically for women-owned businesses. But women-owned businesses may benefit from applying for SBA 7(a) loans and SBA Express loans, as well as SBA microloans. SBA Community Advantage loans are another option for women, with loan amounts between $50,000 and $250,000. These loans can be used like other SBA 7(a) loans for a variety of reasons. Most women-owned businesses use SBA loans for working capital, equipment or commercial real estate.
While SBA loan programs like the SBA 7(a) and SBA 504/CDC can have tantalizingly high maximum amounts of $5 million or more, most borrowers get significantly less than that. There are a few factors that go into how the SBA and their approved lending partners determine how much money to lend to an applicant.
The biggest factor is a business’s cash flow. The SBA and lending officers use a business’s financials – especially cash flow – to determine if a borrower will have the ability to repay a loan. Other aspects of a business also help determine how much a lender will be willing to give them, including credit score (both personal and business scores), debt-to-income ratio, financial history and the size of the collateral that a business can offer to secure the loan.
The best way to secure the most funding for your small business is to be realistic. Take a good look at your finances and your business plan to determine how much you can really afford to pay back. Get a thorough understanding of where you stand financially, both in your business and your personal financials, and especially your credit score.
You can also apply for more than one loan at a time, although this can be tricky and you need to be sure you can afford multiple repayments. Some lenders may consider multiple loans to be a liability as well, because they increase your debt-to-income ratio. Also, if you apply for multiple SBA loan types, you have to keep their maximum loan amounts in mind.
Some startups and other new small businesses may have difficulty qualifying for traditional loans and SBA loans. This is because lenders often use your time in business as a measure of your ability to pay back a loan. However, non-traditional lenders, including many online lenders, may be more willing to lend to newer businesses – but there’s a catch. These loans tend to be more expensive than traditional loans, meaning they have higher interest rates and shorter repayment terms, because the lender is taking on more risk. Always make sure you can really afford a loan before you sign for it.
Grants are another way to get more money for your business if you qualify, and they don’t have to be repaid. There are dozens of small business grants available, especially for businesses that serve specific community needs.
Find the best financing options for your business, including SBA loans, with Swoop. We take your business and financial information and help determine what loans you qualify for, including the maximum amount you can afford. Register online, answer a few questions and get on the path to funding today.
Written by
As a B2B finance content specialist, Kat Cox's goal is to distill complicated financial issues into useful information for small business owners, to save them time they could be using to build their companies. Her work has been featured in Forbes and on financial health platform Nav.com. When she's not writing blogs, web copy, or fiction, Kat can be found walking her dog or singing karaoke in Austin, Texas.
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