How do SBA Loans work?

The Small Business Administration (SBA) is a U.S. government agency that approves billions of dollars in loans to small businesses every year. Most SBA Loans are issued through a bank, a credit union or other lending institution, and the SBA guarantees part of the loan. This guarantee allows banks to utilize more flexible underwriting guidelines in evaluating an SBA Loan request, since a portion of the bank’s credit risk is offset by the government’s guarantee. The guarantee amount varies depending on the size of the loan.

Interest rates on SBA Loans are set by the lender, in keeping with SBA guidelines. The rate is based on the prime rate, plus an additional markup rate called the spread. Interest rates vary slightly depending on the size and terms of the loan.

What does it mean to be a Preferred SBA Lender?

SBA Loans require a high level of expertise to ensure a smooth application process, so you’ll want to select a lender who is a Preferred SBA Lender. This means the bank is authorized and approved to underwrite the credit application instead of submitting it to the SBA for approval, which will save time in completing the loan process.

What qualifies my business for an SBA Loan?

Not all business types are eligible for an SBA Loan. Financial institutions, life insurance providers, passive businesses (for example, investment properties) and speculative businesses (such as oil exploration) are among those who cannot secure SBA financing.

In addition, your business must:

  • Do business in the U.S.
  • Operate for profit
  • Meet SBA business size standards
  • Have a reasonable amount of invested equity
  • Have a demonstrable ability to repay the loan

What are the accepted loan purposes for an SBA Loan?

This list is not all-inclusive, but some of the most common approved loan purposes are:

  • Business acquisition and partner buyouts
  • Purchase of owner-occupied commercial real estate, including special use properties
  • Building construction or expansion
  • Working capital
  • Debt refinancing
  • Purchase of machinery or equipment
  • Purchase of furniture, fixtures and/or leasehold improvements

What information do I need to provide during this process?

Preliminary Discussion
  • Overview of business and loan purpose
  • Interim financial statements for the business
  • Three years’ business and personal tax returns
  • Personal financial statements

At Application
  • Completed loan application
  • Business plan with projections and assumptions
  • Accounts payable and accounts receivables aging reports
  • Affiliate company information
  • Copy of purchase agreement (for business purchase)

During Loan Process
  • Be ready to provide additional information during the loan process. Sometimes the documentation may not paint a full picture, and the loan officer may ask for your help in filling in any gaps.

All loans subject to Texas Capital Bank, N.A. credit approval and SBA eligibility.


contact an expert


Tim Collins | 602.228.6647


Sean Waybright | 303.324.1096


Jeff Kalaman | 941.962.2243

Texas - Austin

Connie Ramos | 214.513.2623

Texas - Dallas/Ft. Worth

Jason Parsons | 214.886.2395
Ben Terry | 254.495.1068
Connie Ramos | 214.513.2623

Texas - Houston

Michele Brown | 281.988.5999
J.P. Prinz | 832.308.7070

Texas - San Antonio

J.P. Prinz | 832.308.7070

SBA Group Manager

John Gannon | 817.852.4082


What small business owners need to know

Fuel your expansion with an SBA Loan. Learn the basics to see if it’s the right financing option for you.


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