The 20% rule for SBA loans generally mandates that any individual or entity owning 20% or more of a small business applicant must provide an unconditional personal guarantee for the loan. This rule applies primarily to SBA 7(a) and 504 loans, ensuring that major owners are personally liable if the business defaults on the loan.
The new SOP changes loan eligibility criteria, underwriting standards, and procedures, and becomes effective on June 1, 2025. This Insight reviews those changes, which generally limit eligibility in certain cases, tighten underwriting standards, and put more responsibility on participating lenders.
For general SBA purposes, a small business must be for-profit, U.S.-based, independently owned, not dominant nationally in its field, and meet specific size standards (revenue/employees) for its industry, with variations for specific programs like loans or contracting. Key requirements include being a for-profit entity, operating in the U.S., being independently owned, not being nationally dominant, and meeting SBA's specific size definitions.
What: The EIDL advance grant is a form of small business relief providing $10,000 dollars in grants, i.e., completely free and non-repayable money, to select small businesses. The grant program was part of the initial CARES Act in 2020, but funds were exhausted within weeks.
Available assistance
A total of $20 million is available in 2025-26 to support eligible South Australian small and medium businesses and not-for-profit organisations, with grants ranging from $2,500 to a maximum of $75,000 per eligible business. Note that all grant amounts exclude GST.
Cons of SBA Loans for Small Businesses
SBA 504 loans are used for fixed business assets, like buying commercial real estate, and often require at least a 10% SBA loan down payment towards the total project.
It's usually expressed as a percentage of the purchase price. So, if your mortgage requires that you put down, say, 3%, the down payment needed for a $500K house would be $500,000 x 3% = $15,000. And a 20% down payment would require $100,000 ($500,000 x 20% = $100,000).
Yes, a new LLC can get an SBA loan, but it's challenging as lenders often prefer established businesses (2+ years), requiring strong personal credit, a solid business plan, and sometimes collateral, though SBA microloans and certain 7(a) programs offer more flexibility for startups, focusing on the owner's creditworthiness and feasibility of the business idea.
What is the current SBA loan rate? SBA loan rates vary depending on several factors, including the type of SBA loan, the size, and the maturity date. The current prime rate (as of January 5, 2026) is 6.75%. That means SBA 7(a) loan fixed rates can range between 9.75% and 14.75% depending on your loan terms.
No, the Paycheck Protection Program (PPP) is not coming back for new loans; the program officially ended in May 2021, with the last funds disbursed, but existing borrowers can still apply for loan forgiveness, a process the SBA continues to support for those who meet eligibility criteria, U.S. Small Business Administration (SBA). While new funding is not available, the SBA website provides resources for managing forgiveness, which requires specific use of funds for payroll and other eligible expenses, Small Business Administration (SBA).
If you default on an SBA loan, the lender seizes collateral, the SBA pays the lender and then pursues you, potentially transferring the debt to the U.S. Treasury, which can garnish wages, seize tax refunds, and levy bank accounts, severely damaging credit and risking lawsuits. Early communication with the lender can lead to options like loan modification, but inaction escalates collection actions.
Key takeaways. SBA 7(a) and 504 loans may have prepayment penalties. SBA microloans and disaster loans do not. Paying off your SBA loan early can be worth it if the interest savings outweigh any prepayment penalties.
The SBA disbursed more than 4.1 million EIDL loans totaling approximately $400 billion. The SBA has reported that 1.3 million EIDL loans are in default, in liquidation, or have been charged off. This is actually not much different from the federal government's originally projected default rate of 37%.
The government does not offer "free money" for individuals. Federal grants are typically only for states and organizations. But you may be able to get a federal loan for education, a small business, and more. If you need help with food, health care, or utilities, visit USA.gov's benefits page.
Yes, you can get funding to start a business through various options like SBA loans, microloans, grants (federal/state/private), angel investors, venture capitalists, or online lenders, depending on your business model, credit, and needs, with the SBA offering guarantees to traditional lenders for risky startups. Key steps include developing a strong business plan and exploring resources from the SBA and state economic development agencies.
The Foundation for Black Communities (FFBC) is proud to launch the Black Ideas Grant (B.I.G.) 3.0, 2025. This funding opportunity offers $ 8 million in investment to support Black-mandated, Black-led, and Black-serving (B3) charitable and non-profit organizations across Canada.