SBA vs Conventional Loan — Which Is Better for Your Business?
SBA loans trade a slower approval for a lower down payment and longer terms. Conventional loans trade a larger down payment for speed and flexibility. Here's how they compare, side by side.
Side-by-Side Comparison
| Feature | SBA Loan | Conventional Loan |
|---|---|---|
| Loan amount | Up to $5M (7a) / $5.5M (504) | $500K - $50M |
| Down payment | As little as 10% | 25-50% |
| Interest rate | Prime + 0%-3% (7a) / below-market fixed (504) | 7% - 8.5% |
| Term length | Up to 25 years | 15-30 years |
| Time to close | Several weeks (30-60 days) | 30-45 days |
| Government fees | SBA guarantee fee | None |
| Underwriting basis | Credit, cash flow, collateral | Property cash flow (DSCR 1.25+) |
| Best for | Lower down payment, longer terms, flexible use | Strong cash flow, faster close |
Pros & Cons
SBA Loan
As little as 10% down payment
Terms up to 25 years lower the monthly payment
Flexible use of funds (7a): working capital, equipment, real estate, acquisition
Longer approval timeline (30-60 days)
SBA guarantee fee added to the loan
Owner-occupancy requirement on real estate
Conventional Loan
Faster close: 30-45 days
No SBA guarantee fee
Works for non-owner-occupied and investment property
Larger down payment: 25-50%
Requires strong, stable cash flow (DSCR 1.25+)
Shorter amortization can mean a higher monthly payment
Which One Is Right for You?
Choose an SBA loan when you have less to put down, want the longest possible term, or need financing that isn't purely underwritten on property cash flow — SBA loans consider your overall credit and collateral profile.
Choose a conventional loan when you want a faster close, don't want to pay a government guarantee fee, or are financing a non-owner-occupied or investment property where the property's own cash flow supports the debt.
Explore SBA loan programs or conventional commercial financing in more detail, or compare SBA 7(a) vs 504 if you already know SBA is the right fit.
FAQ
Frequently Asked Questions
It depends on your down payment and timeline. SBA loans require as little as 10% down and offer longer terms, but take longer to close because of the government approval step. Conventional loans require a larger 25-50% down payment but close faster (30-45 days) with no SBA guarantee fee, since they're underwritten on your property's cash flow instead.
SBA loans require as little as 10% down. Conventional commercial loans typically require 25-50% down, depending on the property type, your credit, and the strength of the property's cash flow.
Conventional loans are faster, typically closing in 30-45 days. SBA loans take longer — often 30-60 days — because the lender's approval is followed by an additional SBA review step.
No. Conventional loans carry no SBA guarantee fee since there's no government guarantee involved. SBA loans include a guarantee fee that's rolled into the loan, which is part of the tradeoff for the lower down payment and government backing.
Conventional loans typically look for a minimum 600 FICO score alongside a debt service coverage ratio (DSCR) of at least 1.25. SBA loans typically look for a personal credit score around 680, plus at least 2 years in business.
Generally no — SBA 7(a) and 504 loans require the business to occupy the majority of the property. A conventional commercial loan is the better fit for non-owner-occupied or investment property, since it's underwritten on the property's own cash flow and debt service coverage ratio (DSCR).
Still have questions? Our loan experts are here to help.
Not Sure Which Loan Fits Your Business?
Talk to a Halo Business Finance expert — we'll help you weigh the down payment, timeline, and terms to find the right fit.