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SBA loan vs term loan
Compare SBA 7(a) loans with conventional and online term loans: rates, terms, approval time, paperwork and total cost on the same amount.
The short answer
An SBA 7(a) loan usually costs less and spreads payments over more years, but takes longer and asks for more paperwork. A conventional or online term loan can fund in days with lighter documentation, at a higher rate and over a shorter term. If you can wait and qualify, SBA is often cheaper; if timing matters, a term loan may fit better.
Side by side
| Feature | SBA loan | Term loan |
|---|---|---|
| Best for | Larger, planned investments where a lower payment matters | Defined projects that need money in days or weeks |
| Typical term | Often up to 10 years; real estate can run longer | Often 1–5 years |
| Cost | Lender rate capped by SBA over the prime rate, plus an SBA guaranty fee | Varies widely by lender and profile; online lenders usually charge more |
| Time to funding | Weeks to a few months | Days to a few weeks |
| Paperwork | Heavy: tax returns, financial statements, projections, SBA forms | Lighter: bank statements and basic financials for many online lenders |
| Collateral & guarantees | Personal guarantee from owners of 20% or more; collateral where available | Often a personal guarantee; collateral depends on the lender |
Choose SBA loan if…
- You can wait several weeks for funding
- You want the lowest payment over a long term
- Your financials and tax returns are in order
- The money funds equipment, real estate, an acquisition or long-term growth
Choose term loan if…
- You need the money in days or a few weeks
- You'd rather trade a higher rate for less paperwork
- The need is short-term and you can repay within a few years
- You may not meet SBA eligibility or collateral expectations
What it costs on the same amount
Borrowing $250,000. Illustrative rates only — your offers will differ.
SBA loan
SBA 7(a) at 10.5% for 10 years
- Payment
- $3,373.37 a month
- Repaid over
- 120 months
- Total cost (interest + fees)
- $154,804.99
- Yearly cost (APR)
- 10.5%
Term loan
Term loan at 15% for 3 years, 2% fee
- Payment
- $8,666.33 a month
- Repaid over
- 36 months
- Total cost (interest + fees)
- $66,987.96
- Yearly cost (APR)
- 16.4%
The SBA loan has the lower monthly payment and the lower APR, but more total interest because it runs much longer. The SBA figure excludes its guaranty fee, which varies by fiscal year and loan size.
Questions owners ask
Is an SBA loan a type of term loan?
Yes. An SBA 7(a) loan is a term loan made by a bank or other lender and partly guaranteed by the U.S. Small Business Administration. The guarantee lets lenders offer longer terms and capped rates to businesses that qualify.
Why do SBA loans take longer?
Lenders follow SBA rules on eligibility, documentation and collateral, and many loans need SBA forms and reviews. A complete, organized file is the best way to keep the timeline short.
Can I use a term loan now and refinance into an SBA loan later?
Sometimes. SBA loans can refinance some existing business debt when it meets SBA's conditions. Check any prepayment fee on the first loan before you sign.
Terms on this page
APR (annual percentage rate)Guaranty fee (SBA)Personal guaranteePrime rateSBA 7(a) loanTerm loan
Read next
Guides that go deeper.
01SBA 7(a), 504 and Express: what changes?
Compare SBA 7(a), 504 and Express loans by maximum size, use of funds, structure, process and business fit before approaching an SBA lender.
Read the guide ↗
02SBA loan application checklist: build a lender-ready file
Use this SBA loan application checklist to organize eligibility, financials, ownership, collateral and transaction documents before contacting lenders.
Read the guide ↗More comparisons
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Comparisons and examples are for education only, use illustrative terms, and are not an offer or commitment to lend. Actual rates, fees and terms depend on each provider’s review. ScaleKit Financing is operated by Arch Ventures LLC and is not a lender.