SHANE PIERSON
Purveyor of Honest Capital
The Problem With SBA Loan Advice Online
Ask for small business funding advice on Reddit or anywhere else online, and one of the first comments you’ll see is this:
“Just get an SBA loan.”
It sounds helpful. But for a lot of business owners, it ends up being frustrating or misleading. Because while the SBA 7(a) loan program is a great tool in the right situation, the internet tends to package it like it’s some kind of golden ticket.
The reality is more layered. And if you don’t understand how it actually works, you’re going to waste time chasing a deal that was never going to work for your business in the first place.
This isn’t just about gatekeeping or discouraging people. It’s about saving owners time, protecting their energy, and getting them in front of the right kind of capital when it actually matters. There’s nothing worse than burning six weeks pulling paperwork and explaining your business, only to hear, “Sorry, this isn’t going to work after all.”
That’s what this breakdown is for. Not to scare you away from the SBA. But to help you use it with clear expectations. So let’s clear up some of the most common myths that keep showing up in posts, comments, and casual advice threads.
Myth 1: The SBA Lends You the Money
This is the most common misunderstanding by far. A lot of people hear “SBA loan” and think the federal government is cutting checks to small businesses. That’s not how it works.
The SBA doesn’t lend money directly. It guarantees a portion of the loan that is made by a bank or non-bank lender. That guarantee reduces the lender’s risk. If you default and they followed all the SBA rules, the SBA will reimburse them for up to 75 or 85 percent of the unpaid loan amount, depending on size.
You’re still borrowing from a regular institution. The lender is still underwriting the deal, asking for documentation, and making the credit decision. The SBA guarantee just gives them more confidence to say yes to deals they might otherwise decline.
That’s also why each SBA lender is different. Some are aggressive and will look at tougher deals. Others play it safe and stick to low-risk transactions. Just because it’s an SBA loan doesn’t mean every bank will see it the same way.
If you walk in expecting the government to fund your business directly, you’ll be disappointed. What the SBA actually offers is access. The money comes from lenders. The SBA just helps them take the shot.
Myth 2: SBA Loans Are Quick and Easy
People love to say SBA loans are the best-kept secret in small business. But they rarely mention how long it takes to unlock that secret.
SBA loans are not fast. They are not easy. And no lender who knows what they’re doing will promise you same-day approval or funding in a week. That’s not how the process works.
Even with a well-prepared borrower, you’re looking at several weeks minimum. If there’s real estate involved, it can stretch out longer. If it’s a business acquisition with seller financing or tax complexities, you might be closer to sixty or ninety days.
And the paperwork? It’s not excessive for the sake of being difficult. It’s required to show the SBA that your loan meets their eligibility and credit standards. This means tax returns, personal financial statements, business plans, debt schedules, projections, and often third-party reports like appraisals or environmental reviews.
It’s work. But it’s also a real loan with real terms. Low rates. Long repayment periods. Use of proceeds that can support acquisitions, working capital, and long-term growth.
If you’re expecting a credit-card-style application and 48-hour funding, this is not the lane. You earn an SBA loan by preparing for it properly. It’s not impossible. It just takes work.
Myth 3: SBA Is Always the Best Option for Small Business Loans
This one shows up constantly. A founder or owner posts something like, “I need $150K for equipment or expansion, what’s the best way to get it?”
And half the replies say, “SBA loan.”
It’s not bad advice. But it’s incomplete.
SBA loans are powerful, especially when you need long terms, smaller monthly payments, or flexibility with use of funds. But that doesn’t automatically make them the best option for every business in every situation.
Sometimes, a traditional commercial loan or line of credit from your local bank is faster, cheaper, and less complicated. Especially if you’ve been banking with them for years and your financials are clean. In those cases, the bank might offer something that beats the SBA route because they don’t have to follow the government’s rulebook. They can move faster, take different risks, or use internal programs that fit the deal better.
Another example is equipment financing. If you’re buying machinery or vehicles, sometimes the manufacturer or a specialty lender will offer a better rate or structure than a general SBA lender. They know the asset, they can underwrite faster, and the terms might be just as strong without all the paperwork.
The key point is this. SBA is not always cheaper. And it’s not always faster. It’s a great tool, but it’s not a blanket solution. You need to compare your options side by side, not assume one path is best just because someone on the internet said it worked for them.
Your business, your financials, and your goals should shape the capital strategy. Not the label on the loan.
Myth 4: SBA Loans Are Only for Struggling Businesses
There’s this weird idea floating around that SBA loans are a backup plan. That they’re what you go for when a regular bank says no. Or that they’re only for distressed businesses that need help staying afloat.
That’s not true at all. In fact, many of the businesses that qualify for SBA loans are already successful. They’re profitable. They have clean books. They just need a loan structure that gives them more time to repay, or covers things traditional lenders don’t like to finance.
For example, if you want to buy a business and part of the purchase price includes goodwill, most banks won’t touch that. But SBA lenders will. If you’re acquiring a company with strong cash flow but few hard assets, SBA might be your best path to finance the deal.
Same goes for working capital, partner buyouts, or rolling multiple uses of funds into one loan. SBA financing is built to support healthy businesses that want to keep growing without overleveraging themselves on short-term money.
It’s not a plan B. For a lot of deals, it’s the right plan A.
Myth 5: Every SBA Lender Is Basically the Same
Another common trap is thinking that once you decide to get an SBA loan, it doesn’t really matter which lender you choose. As long as they offer SBA, they should all be working from the same rulebook, right?
On paper, that’s true. The SBA sets the guidelines. But how those guidelines are interpreted and applied varies widely from one lender to the next. Some are aggressive. Some are cautious. Some specialize in startups, others want mature businesses with two years of profitability. Some will let you roll in closing costs or use seller financing creatively. Others won’t.
Then there’s speed. One lender might take six weeks to close a deal. Another might drag it out for three months. Some will communicate clearly and push things forward. Others will sit on documents and leave you in the dark.
You’re not just choosing a loan program. You’re choosing a team to help you get the deal done. And that team can make or break your experience.
If you’re serious about using SBA financing, spend time finding the right lender for your specific situation. Ask questions. Get referrals. Talk to people who’ve closed with them before. You’re not just buying money. You’re buying process.
The Real Strength of SBA Loans and When to Use Them Wisely
After cutting through the myths, you’re left with the actual value of SBA loans. And that value is real, as long as you understand the role they play.
SBA loans shine when you need flexibility and time. If you’re buying a business and want a long runway to stabilize operations, a ten-year term at a reasonable interest rate is hard to beat. If you’re consolidating high-interest debt and need to free up monthly cash flow, this structure can create breathing room. If you’re trying to buy out a partner or invest in growth without giving up equity, SBA lets you do that with a fixed cost of capital.
The repayment terms matter. The ability to include working capital, goodwill, and even closing costs into the financing can make or break a deal. No other loan structure allows that kind of flexibility for small businesses at this scale.
But it’s not for quick flips. It’s not for low-margin businesses that are barely breaking even. And it’s not for people who are hoping capital will solve problems they haven’t fixed internally. It’s built for owners who know what they’re doing, who can document it, and who have a plan for the money that produces a measurable return.
Use SBA financing when you need to move big levers and you have the track record to back it up. That’s when it works best. It’s not a shortcut. It’s a tool for disciplined operators.
