WASHINGTON – Today, U.S. Small Business Administration (SBA) Administrator Isabella Casillas Guzman announced the agency reached $44.8 billion in funding to small businesses through more than 61,000 traditional loans for fiscal year (FY) 2021.
“In the midst of a once-in-a-generation pandemic, the SBA’s mission-driven team delivered a record number of SBA’s traditional loans to our nation’s small businesses – in addition to more than $1.1 trillion in COVID-related relief since the start of the pandemic,” said SBA Administrator Guzman. “While progress has been made, our data also tells a deeper story: historic inequities in accessing capital persist, and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs. We will continue to build on our impactful programs to meet small businesses where they are and connect them with the resources needed to thrive.”
“The SBA continues to make headway in helping small businesses access much-needed capital, but much more work remains to be done,” said Patrick Kelley, Associate Administrator for the Office of Capital Access. “Our flexible, low-interest 504 loan program grew in loan volume by 41%, and the SBA team is already at work for fiscal year 2022 to support job and entrepreneurial growth across the country.”
Overall Funding and Impact:
Under Administrator Guzman’s leadership, the SBA has made it a priority to increase access to capital for business owners across the nation, particularly from traditionally underserved communities. Fiscal year 2021 traditional lending data of note includes:
- $36.5 billion in 7(a) loans: Nearly 52,000 7(a) loans worth more than $36.5 billion were provided to small businesses. Lenders reported that minority business owners received nearly $11 billion in 7(a) loans or 30% of the SBA’s total 7(a) portfolio. Data also shows that women-owned businesses received nearly $5 billion in FY 21, while veteran-owned businesses received $1.2 billion.
- $8.2 billion in 504 loans: Working with authorized Certified Development Companies (CDCs), the SBA’s 504 program delivered 9,600 loans worth more than $8.2 billion to small businesses, fully exhausting funding authority for the first time in the program’s history. Minority business owners received nearly $1.88 billion in loans -- 23% of the total 504 portfolio. In FY 21, the program also provided over $712 million in lending to women-owned businesses and increased its support of rural small businesses by nearly 33%.
- $71.8 million in microloan funding: In fiscal year 2021, $71.8 million in microloan funding went to nearly 4,400 small businesses. Forty-one percent of those loans went to underserved communities, including Hispanic-owned and Black-owned small businesses.
Addressing Equity Challenges That Persist Throughout the Small Business Economy:
Despite significant progress in its traditional lending programs, the agency is acutely aware of gaps that persist for certain communities in accessing capital. The SBA’s existing loan programs serve an important role in credit markets for small businesses, particularly those with collateral and demonstrated revenue that are denied a loan by a commercial bank or often lack relationships with established lenders.
Over the past five years, loans issued to the smallest borrowers through the SBA-backed 7(a) loan, Express, and Community Advantage decreased by over 45%. However, the decline in the proportion of small-dollar loans is not unique to SBA loan portfolios. Federal Deposit Insurance Corporation (FDIC) data on commercial small business lending by regulated banks shows an overall 3% decline (translating to over 600,000 loans) in the proportion of loans under $100,000. This lack of small-dollar loan appetite from lenders has led to disproportionate impacts on minority business owners. Firms with non-Hispanic Black ownership and firms with $100,000 or less in revenues were only half as likely as firms with non-Hispanic white ownership to obtain bank funds (23%, 24%), and Latino-owned firms were similarly lower (34%).
Addressing the systemic gap in access to capital for the smallest and underserved businesses has been Administrator Guzman’s north star and will continue to be a top SBA priority in FY 22 and beyond.
For more information about SBA’s loan programs, financial assistance, and other services, visit www.sba.gov.
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About the U.S. Small Business Administration
The U.S. Small Business Administration makes the American dream of business ownership a reality.As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from a declared disaster.It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.
FAQs
Many statistics say that large banks approve SBA loans at rates as low as 20-30%, while smaller banks approve SBA loans at around 40% or less. All this to say: SBA loan approval rates hover at half or below all loan applications that are submitted.
Is SBA still lending money? ›
SBA is no longer accepting new Advance applications or reevaluation requests. We continue to process applications and reevaluations received prior to the deadlines. SBA continues to offer other funding options for small businesses including traditional SBA loans.
What is the highest SBA loan amount? ›
The SBA 7(a) Loan program
SBA 7(a) loans are the most popular type of SBA loan. These loans are federally guaranteed term loans with a maximum loan amount of $5 million. Business owners often use SBA 7(a) loans to finance working capital needs, buy an existing business, refinance debt, or purchase new equipment.
Are SBA loans easy? ›
In general, SBA loans are not as difficult to get as business bank loans. Because they're backed by the U.S. government, they're less risky for banks than issuing their own loans.
What disqualifies you from getting an SBA loan? ›
The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.
What is the easiest SBA loan to get? ›
SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.
Will the SBA loan ever be forgiven? ›
Business owners defaulting on their SBA loan can apply for loan forgiveness, but that does not guarantee the SBA will approve the request. It is more commonly referred to as an "offer in compromise". The SBA evaluates your case and discusses the matter with the lender.
What happens to an SBA loan if the business closes? ›
If you have an SBA loan, it can be discharged along with other unsecured debts. However, if you pledged collateral for the loan, like your business equipment or property, the SBA might use those assets to repay the loan before other creditors.
Will SBA loans have to be paid back? ›
The SBA Will Initiate Collections
The SBA guarantees all partner lenders 50% to 80% of the loan, even if you don't pay. In case of default, the SBA will pay up to 85% of the loan amount. Though the amount they actually pay your lender will be 85% of the loan minus the debt recovered from selling your assets.
Why are SBA loan rates so high? ›
SBA Loans and the WSJ Prime Rate
These loans are usually based on the WSJ prime rate and the lender's margin, meaning that when the prime rate increases, so does the interest rate on the loan.
While you can get up to $5 million for a standard SBA 7(a) loan, most borrowers in 2022 took out just under a million dollars at $999,210. The average for all SBA 7(a) loans, including the Small Loan and Express programs, was $538,903. Express loans, which are limited to a $500,000 maximum, averaged $97,097 in 2022.
What are the 7 eligibility requirements for a 7A loan? ›
Am I eligible?
- Be an operating business.
- Operate for profit.
- Be located in the U.S.
- Be small under SBA Size Requirements.
- Not be a type of ineligible business.
- Not be able to obtain the desired credit on reasonable terms from non-Federal, non-State, and non-local government sources.
Normally, your personal credit report shouldn't be impacted by a business loan, even if you've personally guaranteed the loan. Business debt and payment history do not affect your credit score, unless the business defaults on the loan, in which case your personal credit can be negatively impacted.
What is the failure rate of SBA loans? ›
With 1 in 6 SBA loan defaults within the last decade, it's important to look into why this is happening.
Can you get denied for an SBA? ›
In addition to the requirements set by the SBA, lenders will also have their own business loan requirements you must meet. There are a variety of reasons why your application may have been rejected. The size of your business, cash flow and a few other factors will all play a role.
How hard is a SBA loan to get? ›
In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding.
What is the success rate of small business SBA? ›
According to the SBA, approximately 80% of small businesses survive their first year. The survival rate increases to 50% after five years and 30% after ten years.
What is the failure rate of the SBA loan? ›
With 1 in 6 SBA loan defaults within the last decade, it's important to look into why this is happening.
Why are SBA loans hard to get? ›
Considered a Startup
Lenders are more likely to approve a loan application when you can show consistent, positive cash flow, ideally over several years. Every small business owner must start somewhere, but being unable to show the bank any revenue history makes it hard to qualify for an SBA loan.
