When entrepreneurs come to us at Good 4 The People, one of the most common questions is: "Should I get an SBA loan or a regular term loan?"
The answer depends on three things: how fast you need the money, how much you need, and how long you've been in business. Let's break down both options so you can make an informed decision.
SBA Loans: The Basics
SBA (Small Business Administration) loans aren't actually made by the government. They're made by banks and lenders, but the SBA guarantees a portion of the loan — which reduces the lender's risk. Because of that guarantee, SBA loans typically offer:
- ✓Lower interest rates: Often 6-10% (vs. 12-25% for traditional term loans)
- ✓Longer repayment terms: Up to 10-25 years depending on the loan type
- ✓Higher loan amounts: Up to $5 million for SBA 7(a) loans
- ✓Lower monthly payments: Due to longer terms and lower rates
SBA Loan Types
SBA 7(a): The most common. Up to $5 million for working capital, equipment, real estate, or refinancing. 10-25 year terms.
SBA 504: For major fixed assets (real estate, equipment). Up to $5.5 million. Below-market fixed rates.
SBA Microloans: Up to $50,000 for startups and small businesses. Often easier to qualify for than 7(a) loans.
SBA Loan Requirements
- ✓Time in business: Typically 2+ years (some microloans accept 1 year)
- ✓Credit score: 680+ for most lenders (some accept 650)
- ✓Revenue: Demonstrated ability to repay
- ✓Business plan: Often required, especially for larger amounts
- ✓Collateral: May be required for larger loans
- ✓Down payment: 10-20% for real estate or large equipment
The Catch
Speed. SBA loans take 60-90 days to fund — sometimes longer. The application process is document-heavy: tax returns, financial statements, business plans, personal financial statements, and more.
If you need capital in the next two weeks to seize an opportunity, an SBA loan won't get you there.
Term Loans: The Basics
Traditional term loans (also called business term loans or merchant cash advances in some forms) are funded by private lenders, online platforms, or alternative financing companies. They offer:
- ✓Fast funding: 3-10 business days in most cases
- ✓Simpler applications: Less documentation required
- ✓Flexible qualification: Some lenders work with credit scores as low as 580
- ✓Predictable payments: Fixed monthly or weekly payments
Term Loan Characteristics
- ✓Interest rates: 12-25% (higher than SBA, reflecting the speed and flexibility)
- ✓Loan amounts: $5,000 - $500,000 depending on the lender and your profile
- ✓Repayment terms: 6-60 months (shorter than SBA)
- ✓Qualification: Based on credit score, revenue, and time in business
The Tradeoff
You're paying more for speed and simplicity. A $50K term loan at 18% over 24 months costs significantly more than a $50K SBA loan at 7% over 10 years. But if that $50K generates $200K in revenue because you acted fast, the higher cost was worth it.
When to Choose SBA
- ✓You have 2+ years in business
- ✓Your credit score is 680+
- ✓You can wait 60-90 days for funding
- ✓You need a large amount ($100K+)
- ✓You want the lowest possible rate
- ✓The capital is for long-term investment (real estate, equipment)
When to Choose a Term Loan
- ✓You need funding within 1-2 weeks
- ✓Your business is 1-3 years old
- ✓Your credit score is 620-700
- ✓You need $10K-$50K
- ✓The capital will generate quick ROI (marketing, inventory, hiring)
- ✓You want a simple application process
The Smart Approach: Both
Here's what savvy business owners do: they use a term loan for immediate needs while simultaneously applying for an SBA loan.
Example: You need $75K. You get a $25K term loan in 7 days to start a marketing campaign. Meanwhile, you apply for a $75K SBA loan. When the SBA loan funds 60 days later, you use a portion to pay off the term loan and keep the rest for growth.
This gives you speed AND cost efficiency — the best of both worlds.
How Good 4 The People Helps
We don't push one product over another. During your Funding Readiness Audit, we assess your timeline, needs, and credit profile, then recommend the right funding strategy — whether that's a term loan, SBA referral, credit stacking, or a combination.
Our Starter Funding tier ($10K-$25K) uses term loans for fast access to capital. Our Scale Funding tier ($30K-$100K+) often incorporates multiple funding sources, including SBA products when the client qualifies.
Not sure which path is right? Book your free Funding Readiness Audit. We'll assess your profile and recommend the funding strategy that fits your situation.