SBA loans for startups and new businesses

Can a startup get an SBA loan?

Yes. The SBA doesn’t require a business to have a track record before it can borrow, and an SBA-guaranteed loan is one of the few ways a new business can get long-term financing from a bank. The SBA guarantee reduces the lender’s risk, which makes lenders more willing to fund a business that doesn’t have years of tax returns yet.

That said, start-up loans are harder to get than loans to established businesses. Lenders differ a lot in how often they fund start-ups, and those that do want to see three things: you know the industry, your numbers are realistic and you have real money at stake.

What counts as a startup for an SBA loan?

The SBA uses two definitions, and they trigger different rules.

Definition

Start-up:

For SBA 7(a) loans, a business that has been generating revenue for 1 year or less, including a business that hasn’t opened yet.

A new business is a broader category: one that has operated for 2 years or less. That definition matters for 504 loans, where new businesses make a larger contribution, and for projections, which lenders rely on when a business has little history.

Buying an existing business isn’t a start-up, even if you’ve never owned one before. That’s an acquisition, with its own rules: see SBA loans to buy a business.

Which SBA loans work for startups?

Program	Best for	Maximum	Minimum contribution from a new business
SBA 7(a)	Build-out, equipment, working capital and most opening costs	$5 million	10% of total project cost
SBA 504	Buying or building real estate, or long-lived equipment	$5 million SBA portion	15%
SBA microloan	Small amounts for equipment, supplies and working capital	$50,000	Set by the lender

Most start-ups use a 7(a) loan because it can cover the widest range of opening costs in one loan. If your plan includes buying a building, a 504 loan or a commercial real estate loan may fit better. For smaller needs, a microloan from a nonprofit lender can be easier to get and often comes with business coaching.

How much do you need to put down on an SBA startup loan?

Under 7(a), a start-up must inject at least 10% of the total project cost, not just the loan amount. Project cost includes everything the business needs to open: build-out, equipment, inventory, opening working capital and closing costs.

Under 504, a new business contributes 15% of the project. If the property is also a special-purpose building, such as a hotel, the contribution rises to 20%.

Lenders verify where your injection comes from, usually with recent bank statements, and they can ask for more than the minimum, especially when you’re new to the industry or the projections are tight.

What do lenders look for in a startup loan application?

Without a track record, lenders lean heavily on you and your plan:

1. Relevant experience. Management or hands-on experience in the same industry is often the deciding factor. A first-time restaurant owner who has managed restaurants is a very different risk from one who hasn’t.
2. A business plan. A clear description of the market, competition, location, pricing and how you’ll win customers.
3. Financial projections that show the business can cover its loan payments (see below).
4. Personal credit. The SBA doesn’t set a minimum credit score, but lenders review your full credit history and set their own standards.
5. Collateral. Lenders aren’t required to take collateral on 7(a) loans of $50,000 or less. Above that, they take available business assets and, when a loan isn’t fully secured, often a lien on personal real estate.
6. Personal guarantees. Owners of 20% or more must personally guarantee the loan.
7. Eligibility. For 7(a) and 504 loans, all owners must be U.S. citizens or nationals, a rule in effect since March 1, 2026.

What financial projections does a startup need?

Projections are the core of a start-up application. Lenders usually want monthly projections for the early period and annual projections after that, with the assumptions behind every number spelled out.

Definition

Debt service coverage ratio (DSCR):

The cash a business has available to pay its debts, divided by its total debt payments. A ratio above 1 means the business brings in more than it needs to make its loan payments.

The SBA sets a minimum for new businesses, and lenders may set a higher bar of their own:

Projections that hold up in underwriting tend to:

• Tie revenue to evidence, such as comparable businesses, signed contracts, pre-orders or local market data.
• Include every cost, including a reasonable salary for you, the new loan payments and a cushion for a slow start.
• Show an honest ramp-up. Lenders discount plans that reach full capacity in the first few months.

Can you start a franchise with an SBA loan?

Yes. Opening a new franchise location is a common way to start a business with an SBA loan, because the brand’s track record, training and systems can offset a first-time owner’s limited history. The same 7(a) start-up rules apply, and the brand must be listed in the SBA Franchise Directory. See SBA franchise loans for what lenders look for in the brand.

How do you find the right lender for a startup loan?

Lenders differ a lot in how often they fund start-ups. Some regularly finance new businesses in specific industries; others mostly lend to businesses with several years of tax returns. Applying to lenders that already fund new businesses like yours saves time and avoids declines from lenders that were never a good fit.

SBA Loan Connect ranks lenders using the SBA’s public 7(a) and 504 loan records, so you can see which lenders actually fund businesses like yours before you apply. Partner lenders are clearly labeled. See how we rank lenders.