A loan guaranteed by the Small Business Administration (SBA)1 could be the financial catalyst your company needs to get firmly established or to take the next big step toward success. However, many business owners pass up this financing opportunity because of misconceptions about the process of getting an SBA loan or a prior bad experience. If the following myths have been holding you back, here are the facts to debunk them.

Myth 1: The SBA lends money directly to small businesses. Contrary to popular belief, the SBA doesn’t directly make loans. Instead, it provides a guarantee to SBA-approved lenders (usually banks), a process that makes it less risky for them to lend to small businesses.

Myth 2: SBA-guaranteed loans are only for start-ups. Although SBA loans are often used to provide capital to new businesses, they are also ideal for existing businesses that previously had difficulty accessing capital. That’s because SBA loans offer lower down payments, longer re-payment terms, and more flexible qualifying standards than conventional loans.

Myth 3: You’ll get buried in paperwork. Megan Comfort, SVP/Small Business Manager at Nevada State Bank, explained that the amount of information required for an SBA loan is about the same as for a conventional loan. “There are only a few additional forms that need to be completed to benefit from the SBA loan guaranty,” she said, noting that the bank’s small business team can assist potential borrowers in navigating the application process.  

Myth 4: Obtaining an SBA loan is a slow process. While processing SBA loans isn’t typically as quick as with standard commercial loans, the process is often faster than perceived. Many SBA loans are approved within just a few weeks, assuming that the borrower submits a complete application with all the necessary information attached.

Myth 5: SBA loans are only for very small businesses. What if your business is no longer “small” in the traditional sense? You can still benefit from an SBA loan guarantee using the alternative sizing standard, which considers a business as “small” if it has a tangible net-worth under $15 million and net profits over the last 2 years under $5 million.

Myth 6: The SBA is the “lender of last resort.” In reality, SBA loans are often a first-choice option for many successful businesses because of the better terms and down payment requirements available.  It can also maximize the loan amount because of the extended repayment terms not available under conventional programs, which can help improve a company’s debt service and ability to repay the loan. 

Myth 7: SBA loans require perfect credit. The opposite of the myth above is that it’s difficult to qualify for an SBA loan unless you have excellent credit. While creditworthiness is considered, the SBA and its lending institutions understand that small businesses may not have a perfect credit history. SBA and banks do like to see credit history that represents a responsible borrower; however, narratives are often important to help the lender understand the history in the credit report. “With some explanations from the customer, we are often able to understand or overcome credit challenges that may be present in the history of a credit report, especially if that negative event was resolved and in the past,” said Comfort. “The emphasis is more on the potential of a business and what it might be expected to accomplish with a boost from an SBA loan.”

Trying to decide whether an SBA loan is right for your company? Contact NSB’s small business team to get all the facts.  Working with a knowledgeable SBA lender makes a world of difference in your overall experience, including the application, underwriting, and closing process.


1. Subject to credit approval and SBA approval. Terms and conditions apply. See banker for details.