A term loan is the traditional structure: a lump sum repaid in fixed installments over a set period with interest on the declining balance. SBA loans are term loans made by a lender and partially guaranteed by the U.S. Small Business Administration, which is what allows longer terms and lower rates than the lender would offer alone.
This is the cheapest capital on this page, and it is also the slowest and most document-intensive. If your business qualifies and your timeline allows, it is almost always the right first thing to explore.
How SBA and term loans work
Conventional term loans typically run one to five years with monthly or weekly amortizing payments. Underwriting looks at revenue trend, profitability, existing debt service, credit and collateral.
SBA 7(a) is the most common SBA program, used for working capital, equipment, refinancing and acquisitions, with terms up to 10 years (25 years when real estate is involved). SBA 504 funds owner-occupied real estate and major fixed assets. Both require a full document package: tax returns, financial statements, a debt schedule and a personal financial statement.
- Conventional term loans: funded in days, terms of 1-5 years.
- SBA 7(a): terms up to 10 years, typically 30-90 days to close.
- SBA 504: real estate and major fixed assets, up to 25 years.
- A personal guarantee is standard on both structures.
What SBA and term loans cost
SBA 7(a) rates are capped relative to the prime rate, generally landing a few points above prime depending on loan size and term. Expect an SBA guarantee fee on larger loans, plus packaging and closing costs.
Conventional term loans from alternative lenders price higher — often in the low teens to high twenties annually — but close in days rather than weeks and require far less paperwork.
Because these are amortizing loans, interest accrues on the declining balance, so paying ahead genuinely reduces total cost. That is a meaningful difference from factor-rate products.
Who SBA and term loans fit
- Businesses with two or more years of operating history and filed tax returns.
- Owners with 650+ personal credit and demonstrable profitability.
- Companies funding expansion, acquisition, real estate or a long-term project.
- Businesses refinancing expensive short-term debt into a manageable monthly payment.
Who it doesn't fit
If you need money this week, an SBA loan will not get there. The document package alone takes most owners a week to assemble, and underwriting adds weeks more.
Newer businesses, companies with recent losses, or owners with damaged credit generally won't clear SBA underwriting. That's not the end of the conversation — we'll place a shorter-term structure now and build a plan to refinance into SBA pricing later.
What you'll need to apply
- Two years of business and personal tax returns.
- Year-to-date profit and loss statement and balance sheet.
- Business debt schedule and recent bank statements.
- Ownership documents, and a business plan or use-of-funds for expansion requests.
How FinFunders helps
We look at whether SBA or conventional pricing is realistically achievable for your file before you spend two weeks assembling documents. If it is, we route you to partners actively lending in your industry and loan size. If it isn't yet, we say so and structure something appropriate now with a path to refinance.
Either way, you get the same advisor from the first call through the renewal.
Frequently asked questions
- How long does an SBA loan take to fund?
- Most SBA 7(a) loans close in 30 to 90 days from a complete application. Conventional term loans from our partners can fund in a few business days.
- What credit score do I need for an SBA loan?
- Most SBA lenders look for a personal FICO score of 650 or higher, along with two years of filed tax returns and demonstrated ability to service the debt.
- Can I refinance a merchant cash advance with a term loan?
- Often yes. Consolidating expensive short-term advances into an amortizing term loan is one of the most valuable moves a business can make, provided profitability and credit support the new loan.
- Is a personal guarantee required?
- Yes. SBA loans require a personal guarantee from every owner with 20% or more of the business, and most conventional term loans require one as well.
Related guides
SBA Loans vs Alternative Lending: An Honest Comparison
SBA money is cheaper. Alternative money is faster. The right answer depends entirely on whether your opportunity can wait 60 days.
Funding ProductsSBA 7(a) Loans: A Practical Guide for Owners
The cheapest money available to most small businesses — if you can survive the paperwork and the calendar.
Funding ProductsBusiness Term Loans: The Straightforward Option
One amount, one rate, one predictable monthly payment. For stable businesses, boring is usually cheapest.
StrategyHow to Refinance Expensive Business Debt
Refinancing works when it lowers total cost. Rolling one expensive position into another just resets the clock.