Spec notes
- The maximum SBA 7(a) loan is $5 million; SBA guarantees 85 percent of loans of $150,000 or less and 75 percent of larger ones.
- SBA microloans go up to $50,000 through intermediary lenders and cannot be used to pay existing debts or buy real estate.
- SBIR and STTR awards are non-dilutive funding from 11 federal agencies; agencies may issue Phase I awards up to $335,937 and Phase II up to $2,239,578 without SBA approval.
Venture capital gets the headlines in Austin, but most small businesses are financed by loans, savings and revenue, and a meaningful number of tech startups are funded by federal research awards. Two federal programs are worth understanding early: SBA-backed loans and the SBIR/STTR programs, known together as America’s Seed Fund.
SBA loans: the government backs, a bank lends
The U.S. Small Business Administration generally does not lend money directly. Instead it guarantees part of loans made by approved lenders, which makes banks more willing to lend to small businesses. The SBA says guaranteed loans generally have rates and fees comparable to non-guaranteed loans, and it can match you with SBA-approved lenders.
| Program | Size | Key points |
|---|---|---|
| 7(a) loans | Up to $5 million | The main SBA program; uses include working capital, equipment and real estate; SBA guarantees 85% of loans of $150,000 or less and 75% of larger loans |
| Microloans | Up to $50,000 | Made through intermediary lenders; average about $13,000; cannot be used to pay existing debts or buy real estate |
| 504 loans | Varies | Arranged through Certified Development Companies (CDCs), which the SBA lists |
Who qualifies
The SBA says eligibility is generally based on what the business does to receive its income, the character of its ownership and where it operates. Borrowers must be creditworthy and show a reasonable ability to repay. For 7(a) loans, applicants generally must be unable to obtain the credit they need on reasonable terms from non-government sources. Lenders and programs add their own requirements.
For loans of $50,000 or less under 7(a), the SBA caps the interest rate at the base rate plus 6.5 percentage points; the cap falls to base rate plus 6.0 points for $50,001 to $250,000, plus 4.5 points up to $350,000 and plus 3.0 points above that. You always work directly with your lender, not with the SBA.
Tip: Before you meet a lender, prepare the basics an SBA lender will ask about: the amount, what it will be used for, a business plan with projections and your personal credit and finances.
SBIR and STTR: research money that doesn’t cost equity
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs award non-dilutive funding, meaning you do not give up ownership, to small businesses developing technology with a path to commercialization. The SBA coordinates the programs, and 11 participating federal agencies fund them. Each agency runs its own program within guidelines set by Congress, issuing solicitations on topics it needs.
Phases and award sizes
SBIR and STTR awards come in phases, with a smaller Phase I award followed, for successful projects, by a larger Phase II award. According to SBIR.gov, as of October 16, 2026, agencies may issue a Phase I award up to $335,937 and a Phase II award up to $2,239,578 without seeking SBA approval; larger awards require a waiver. Agencies often set lower amounts in their own solicitations.
Is it right for you?
- It fits research-heavy startups with technology that a federal agency needs: health, energy, defense, agriculture, space and others.
- Proposals are competitive and technical; they follow each agency’s solicitation and deadlines.
- SBIR.gov notes that accelerators, technical assistance centers and other support organizations help startups identify and apply for awards.
Protect what you build
If federal funding pays for your research, understand intellectual property early: patents, trademarks and what the award terms say. See Patents, Trademarks and Copyrights for Startups: What Protects What.
Local options first
For a very small first loan, Austin’s Kiva Hub offers access to 0 percent crowdfunded microloans, and the city’s free coaching includes a financial readiness assessment. See Free and Low-Cost Help for Austin Founders: City, County and Library Resources.
Get the paperwork in order
Lenders and agencies will want to see a properly formed business with its own EIN and bank account, current state filings and clean books. See Forming an LLC in Texas: Form 205 Step by Step, Getting an EIN for Your Austin Business: Free, Online and in the Right Order and The Texas Franchise Tax for Startups: Who Files, Who Pays and When.
How to find a lender
The SBA’s Lender Match tool connects borrowers with SBA-approved lenders, and the agency lists microlenders and the Certified Development Companies that handle 504 loans. SBA district offices offer in-person, online and phone help, and its resource partners provide counseling. For microloans, questions about balances and due dates go to the microlender directly, since the intermediary makes and services the loan.
What 7(a) money can pay for
The SBA lists uses for 7(a) loans that include acquiring, refinancing or improving real estate and buildings, and purchasing and installing machinery and equipment. Your lender decides which loan type and terms fit your plan.
The bottom line
SBA programs help you borrow from private lenders on reasonable terms, from small microloans to multimillion-dollar 7(a) loans. SBIR and STTR fund research without taking equity, if your technology matches an agency’s needs. Both reward preparation: clean records, a clear plan and a realistic use of the money.