Glossary
SBA Loan
A small business loan made by a bank or other lender and partly guaranteed by the U.S. Small Business Administration, such as a 7(a), 504, or microloan.
An SBA loan is not usually a loan from the government itself. It is a loan made by a participating lender, like a bank, credit union, or community lender, with the U.S. Small Business Administration guaranteeing part of it. The guarantee lowers the lender's risk, which can mean lower down payments and longer repayment terms for the borrower. The SBA does make some loans directly, mainly disaster loans.
The main programs are 7(a) loans, the most common, used for working capital, equipment, real estate, and buying a business; 504 loans for major fixed assets like buildings and machinery; and microloans for smaller amounts. The SBA says the maximum loan amount for a 7(a) loan is $5 million. Borrowers usually must meet size standards, operate for profit in the U.S., and often provide a personal guarantee.
SBA loans show up in litigation in several ways. Borrowers have sued lenders over fees, servicing, and how loan applications were processed. During the COVID-era Paycheck Protection Program, which the SBA ran through private lenders, disputes arose over lender processing, agent fees, and loan forgiveness. The government has also pursued fraud in SBA programs, including through the False Claims Act, where private whistleblowers can file on the government's behalf and share in any recovery.
If you signed a personal guarantee on an SBA loan, understand that you may be personally liable if the business cannot repay. See our pages on whistleblower and qui tam lawsuits and on credit report errors, which can arise after loan defaults are reported.
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