Growing a business requires capital. Whether you are expanding your facility, acquiring equipment, buying out a partner, or taking on a new contract, the biggest challenge for many Minnesota business owners is finding financing structured to support long-term stability rather than short-term pressure.
That is where the U.S. Small Business Administration (SBA) loan programs can make a difference. The SBA does not lend money directly. Instead, it partners with local banks to provide government-backed guarantees. Those guarantees allow banks to lend to businesses that may not fit a conventional loan structure, or to provide longer terms and lower equity injections for significant investments.
At Security Bank & Trust Co., we provide business loans for Minnesota companies, from manufacturers and contractors to professional service firms, farms, family businesses, and local entrepreneurial ventures. Because we know the market and we get to know you, we help you determine which capital structure aligns with your goals rather than forcing your business to fit a template. We can help you determine whether an SBA loan is the right fit, a MN Deed Guaranteed loan is, or whether a conventional structure may serve you better.
Why SBA loans matter in 2025?
The lending environment in 2025 is very different from the environment of just a few years ago where we saw SBA loans aren’t just for new or struggling businesses. We learned this lesson by providing many SBA PPP loans to help our local small businesses. Today, interest rates are higher than the near-zero levels of the COVID stimulus era. Underwriting expectations have increased. Banks and borrowers alike are operating in a more disciplined credit environment.
In this environment, two realities stand out:
-
Strong businesses are still growing
Minnesota companies continue to expand, modernize, recruit talent, and acquire competitors. The appetite for growth is real.
-
Capital structure matters more than ever
The cost of financing affects flexibility. The wrong structure can restrict growth or strain cash flow. The right structure can support momentum.
SBA lending fits this moment. The SBA guarantee reduces lender risk, allows longer repayment terms, and reduces required equity injections, which helps businesses preserve cash for operations and growth.
What changed in the SBA Programs in 2025?
Most small businesses are eligible for SBA funding. This has not changed. These are the main requirements:
- You’re a for-profit business.
- You do business in the U.S.
- You’ve invested your own time and money into the business.
- The SBA makes loans of up to $5 million.
The changes include:
- Upfront Fee Waiver: Starting October 1, 2025 loans to manufacturers (NAICS sectors 31-33) of $950,000 or less, the upfront fee is 0%. Learn more on our blog about the SBA fee waiver for manufacturers.
- Eligibility: All owners must be U.S. citizens or lawful permanent residents; no foreign nationals, refugees, or undocumented aliens.
- 7(a) Small Loans: Max reduced to $350K; min SBSS score now 165; tax transcripts required.
- Franchise Directory: Reinstated the SBA franchise directory —franchisors must certify by July 31, 2025, or be removed.
- Startups: 10% equity injection required (previously 0%).
- Ineligible Models: Shopping centers, salon suites, ghost kitchens, etc., ineligible unless specific conditions met (e.g., membership dues, no assigned spaces).
- Parole/Probation Owners: Eligible with contingency plans and possible extra guarantors.
- Verification: DOB for all owners; formation date for entities via E-Tran.
- Landlord Reimbursements: Must reduce loan principal or be documented.
- Partial Acquisitions: Third-party verification (CPA statements, sales tax) allowed instead of tax returns.
- Refinancing: Merchant cash advances & factoring no longer eligible.
- Co-Borrowers & Ownership:
- The operating company and all buyers must serve as co-borrowers.
- Any seller keeping under 20% stake is required to personally guarantee the loan for 24 months.
- Existing owners who gain any direct or indirect interest in the company—regardless of size—must also co-borrow.
- New owners’ guarantee obligations are determined by their final post-transaction ownership share.
- Multi-phase partial transfers are prohibited; acquisitions must occur via stock purchase to maintain unbroken ownership and liability continuity.
- Equity for Full Ownership Changes: 10% injection; seller notes ≤50% of equity, on full standby.
- Equity Sources: Cash, assets, grants (no claw-back), standby debt, personal loans (not repaid by business).
- Life Insurance: Required for >$350K loans to single-owner businesses if under-collateralized.
- Working Capital: ≥50% of loan requires justification in credit memo.
What are the SBA Loan Options to Know?
SBA 7(a) loan is the most common SBA loans.
A SBA 7(a) loan can be used for a wide range of needs, including start-up costs and working capital. It can also be used for fixed assets and to refinance debt. Uses include:
- Long and short-term working capital
- Revolving funds based on the value of existing inventory and receivables
- The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
- The purchase of real estate, including land and buildings
- The construction a new building or renovation an existing building
- Establishing a new business or assisting in the acquisition, operation or expansion of an existing business
- Refinancing existing business and real estate debt, under certain conditions
As the primary program, SBA 7a loans also have a number of specialized programs that can be used as a subset of the larger options. The programs fit a certain set of needs and challenges. The options include:
- CAPLines
- SBA Export Working Capital Program
- Community Advantage Loans
- Rural Business Loans
- Veterans Advantage Loans
Key Structural Advantages
| Feature | Benefit to the Business |
|---|---|
| Longer repayment terms | Lower monthly payments, more operating room |
| Lower equity injection in many cases | Preserves cash for payroll, inventory, growth |
| Can include goodwill financing for acquisitions | Supports transitions and continuity |
| Can combine real estate and working capital into a single loan | Simplifies management and financing structure |
Loan Details for 2025
| Item | Typical SBA 7(a) Terms |
|---|---|
| Maximum loan size | Up to $5,000,000 |
| SBA guarantee | 75 percent for loans above $150,000 (85 percent under $150,000) |
| Repayment term | Up to 10 years for working capital and equipment; up to 25 years for real estate-backed portion |
| Loan amount | Max rate |
|---|---|
| $50,000 or less | WSJP rate plus 6.5% |
| $50,001 to $250,000 | WSJP rate plus 6.0% |
| $250,001 to $350,000 | WSJP rate plus 4.5% |
| Greater than $350,000 | WSJP rate plus 3.0% |
SBA 504 Loan: Everything You Need to Know
The SBA 504 loan finances the acquisition of fixed assets, like real estate or equipment. A key component that makes the SBA 504 different from other SBA loans is that it comes with three parts: the lender, the Certified Development Company (CDC) and a borrower. It was designed businesses to buy new real estate and/or heavy equipment without having to significantly hurt cash flow.
A SBA 504 Loan is usually structured:
- 50% Loan from Lender
- 40% Loan from CDC
- 10% Equity from Borrower (it could potentially be up to 20% on specialized cases)
A 504 loan can come with a fixed rate of up to 10 to 20 years and a maximum loan amount of up to $5 million.
The borrower cannot use this money for overhead, payroll, debt servicing, inventory or any other general operating expenses. It can only be used on major, fixed assets such as real estate or heavy equipment. Per an SBA guidance, examples of acceptable 504 loan expenses include:
- The purchase of existing buildings
- The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping
- The construction of new facilities or modernizing, renovating or converting existing facilities
- The purchase of long-term machinery
- The refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment
The CDC SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA. The interest rates for the CDC portion of the SBA loan provides a long-term fixed rate based on debenture funding. The underwriting and credit approval for the SBA 504 loan from the CDC is separate from the underwriting and credit approval from the bank.
The effective rates below include fees to CDC, SBA and central serving agent based on debenture pricing published by NADCO:
| Type of Loan | October 2025 |
| 25 Year SBA 504 | 5.922% |
| 25 Year SBA 504 Manufacturing (New 10/2025) | 5.680% |
| 20 Year SBA 504 | 5.983% |
| 20 Year SBA 504 Manufacturing (New 10/2025) | 5.736% |
| 10 Year SBA 504 | 5.766% |
| 10 Year SBA 504 Manufacturing (New 10/2025) | 5.290% |
| 25 Year SBA 504 Refinance | 5.925% |
| 20 Year SBA 504 Refinance | 5.986% |
For a interest rate history of SBA 504 effective rates.
An SBA loan is worth investigating and may end up being the right solution for you. But they’re not easy to get, and they can come with some drawbacks: the process can be slow and, in some cases, the collateral requirements can be high.
Alternative to the SBA - Minnesota Loan Guarantee Program
As an enrolled lender in the Minnesota Loan Guarantee Program (MNLGP), administered by DEED, Security Bank & Trust Company makes loans to Minnesota-based small businesses with fewer than 750 employees, backed by state guarantees covering up to 80% of principal (capped at $800,000) across our 21 branches statewide. Eligible borrowers apply directly through our team for approved uses including startup costs, working capital, equipment, inventory, or the purchase, construction, renovation, or tenant improvements of business property excluding passive real estate or goodwill. Open to most industries (except SSBCI-ineligible types; see FAQs), the program includes a 0.25% guarantee fee, waived for SEDI-owned businesses or loans under one year. We provide the loan capital; the state provides the guarantee, reducing our risk so we can extend more credit with greater confidence and flexibility to help local businesses grow.
Keep expanding
An SBA loan isn’t a silver bullet. To find the loan that fits your business’ situation, give yourself as many options as possible.
If you haven’t already, consider the limitations of the lenders you’ve approached. They may not understand your business and its needs well enough, or they may not have the flexibility to tailor their products to your situation. You may not really have exhausted your traditional loan options yet.
If you’ve been unable to get the loan you need, establish a relationship with a bank that can help you take a fresh look at your situation. A lender with experience handling SBA loans can help you evaluate this option. Consider working with a local, Minnesota lender focused on personalized service and building customer relationships.
You may find, as you talk with your lender, that an SBA loan would be a good fit. You may find, though, that working closely with a consultative lender leads to other options. A traditional loan can often be a better choice. A lender who knows you and the Minnesota small business environment well may be able to create the right solution.
The way to truly expand your options is to build a relationship with a bank that can customize a loan to fit your unique needs.
Find a partner who’s focused on solutions
In the end, what you may need most is a partner who can offer knowledge and personalized options.
Security Bank & Trust Co. is an experienced SBA Lender. As we get to know you, your business, and your current needs, we can help you evaluate the fit of an SBA loan. Because investing in clients is what we do, we’re committed to finding the solution that’s right for you.
We’re also experts on Minnesota small businesses. It's why we have been ranked as a Best Business Bank in Minnesota. We can combine that knowledge with our growing knowledge of your company to create a traditional loan solution to meet your unique need. We’re always growing, together.
At Security, we’re only satisfied if you succeed. We’d love to learn about your business and help you tackle your current challenges. 
