American entrepreneurs filed 5.7 million applications to start new businesses in 2025 — the highest number in the last two decades, according to the Census Bureau. This surge is being supported by the U.S. Small Business Administration, which recently increased cumulative loan limits for SBA 7(a) and 504 loans to $10 million, double the previous level.
If you’d like to take advantage of increased loan limits, there are 5 important things you need to know about these changes and the SBA program.
1. Applicants need to understand the difference between SBA 7(a) and 504 loans to take advantage of increased limits.
The SBA offers a variety of loans designed to meet the unique needs of small businesses. While the SBA doesn’t limit businesses on the number of loans they can have, it does cap the total maximum borrowing amount for each applicant. You must have a distinct purpose for each loan and demonstrate that you have the cash flow to repay them.
Qualified borrowers who first obtain a 7(a) loan may access up to $5 million and then up to $5 million through the 504 loan program.
7(a) loans are considered the most versatile SBA loan because they may be used to fund startup costs or pay for equipment, machinery or materials. Loan amounts are up to $5 million and can offer improved cash flow and long-term financing during the first critical years of your business.
504 loans finance fixed assets such as land, building and machinery. The bank funds a portion and a Community Development Corporation (CDC) funds a portion, along with the down payment from the borrower. Depending on the type of business or project, your maximum loan amount could range from
$5 million to $5.5 million.
2. Approval for a 7(a) and 504 loan doesn’t guarantee you’ll receive the full $10 million.
Loan limits are influenced by many factors that include:
- Cash flow analysis. Lenders will review your financial performance, tax returns and cash projections to evaluate your ability to repay any funds borrowed. Having strong and consistent cash flow could help you borrow a larger amount.
- Borrower equity injection. If you’re using an SBA loan for business acquisitions or real estate, you’re typically required to put down a minimum equity injection between 10% to 20%. Putting down a larger injection will lower the loan-to-value ratio, making a lender more likely to approve a larger loan.
- Collateral and personal guarantees. Underwriters will evaluate your business and personal assets you have available to pledge. If you have strong collateral, your borrowing cap could be raised.
- Use of proceeds. Your loan limit cannot exceed the documented cost of purpose for which the funds are requested.
3. The vast majority of U.S. businesses are eligible for SBA lending.
SBA loans can be used to fund retail businesses, restaurants, manufacturing, healthcare, construction and professional services. Industries that need funding for major expansion or startups with strong business plans will benefit from the competitive interest rates and long repayment terms that SBA loans typically provide.
SBA loans are prohibited for nonprofits, lenders, gambling establishments, speculative businesses and multi-level marketing companies. This helps the SBA minimize risk to taxpayers and allocate loans to industries that are the most active job creators.
4. Small businesses need to keep SBA’s eligibility rules in mind.
To quality for an SBA loan, a business must be 100% owned by U.S. citizens or U.S. nationals. They must meet the SBA’s size category for small businesses and be able to show annual revenue and cash flow projections.
Typically, businesses that apply for an SBA loan must also have a sound business purpose and good credit. Consult with your lender for a full list of eligibility requirements.
5. Applying for an SBA loan can be facilitated with an SBA preferred lender.
SBA preferred lender status is awarded to lenders who have demonstrated their ability to effectively serve small businesses. SBA preferred lenders like Zions Bank have authority to approve, underwrite and close SBA loans in-house, allowing them to process loans more quickly.
Could an SBA loan help scale your business? Our Zions Bankers are standing by to help you find the right SBA loan that can help your business thrive.
