SBA Loan
SBA loans are small business loans partially guaranteed by the Small Business Administration — most commonly the SBA 7(a) program — offering favorable terms (low rates, long maturities, $5M+ loan amounts) to businesses meeting SBA eligibility requirements, with longer underwriting cycles than MCA.
Why This Matters
SBA loans are the gold standard for small business financing — when a business qualifies. SBA 7(a) loans offer rates of Prime + 2-4% (currently 10-12%), maturities up to 25 years, and amounts up to $5M. Eligibility requirements are stringent: meaningful collateral, owner equity contribution, strong personal credit, multi-year financial documentation, and 60-90 day underwriting cycles. SBA loans serve established businesses with planned major investments (real estate, business acquisition, large equipment). MCA serves businesses needing speed, accessibility, or smaller amounts — products operate in different market segments rather than direct competition.
Example
Established restaurant owner expanding to second location applies for $750K SBA 7(a) loan: $500K real estate, $200K equipment, $50K working capital. SBA underwriting takes 75 days. Approved at 11% APR, 15-year term (real estate portion), 7-year term (equipment portion). Monthly payment $7,500. Cost of capital dramatically lower than equivalent MCA structure but timeline 25x slower.
Frequently Asked Questions
Frequently Asked Questions
What businesses qualify for SBA loans?
Established businesses (typically 2+ years), strong personal credit (680+ FICO often required), demonstrable cash flow for debt service, owner equity contribution (often 10-20%), and acceptable collateral. Specific eligibility varies by SBA program (7(a), 504, microloans).
Why would a qualifying business take MCA instead of SBA?
Speed — MCA funds in days, SBA in months. Use of funds — MCA accepts any use; SBA restricts to specific eligible purposes. Documentation burden — MCA requires bank statements; SBA requires extensive financial history. Sometimes the right product depends on timing rather than cost.