Most nonprofits cannot borrow through the SBA’s standard 7(a) or 504 programs because those programs require a for-profit borrower. The narrow exception is SBA Microloans, which may be available to certain not-for-profit childcare centers. Eligibility depends on the borrowing entity, its activities, and the program’s requirements.
Which SBA loan programs can a nonprofit use?
| Program | Rule for nonprofit applicants | What it can finance | Where to apply |
|---|---|---|---|
| 7(a) | The borrower must be an operating business that operates for profit. SBA’s current program page lists a maximum loan amount of up to $5 million; the page does not state a publication year. SBA 7(a) loans | Eligible uses include working capital, real estate, equipment, supplies, and ownership changes. | A participating lender; SBA also offers Lender Match. |
| 504 | The borrower must be an operating, for-profit U.S. business that meets SBA size requirements. The current SBA page lists a maximum of up to $5.5 million; the page does not state a publication year. SBA 504 loans | Major fixed assets such as buildings, land, and long-term machinery. It cannot finance working capital or inventory. | A Certified Development Company (CDC), working with a private lender. |
| Microloan | Certain not-for-profit childcare centers are included; that does not make nonprofits generally eligible. The current SBA page lists loans of up to $50,000; it does not state a publication year. SBA Microloans | Small loans for eligible businesses and qualifying not-for-profit childcare centers. | An SBA-approved intermediary. |
Why 7(a) and 504 usually do not fit a nonprofit
SBA’s 7(a) eligibility requirements include operating for profit, being located in the United States, meeting SBA size standards, and demonstrating creditworthiness and a reasonable ability to repay. Its 504 program likewise requires an operating, for-profit U.S. business that meets size requirements. The 504 program is designed for major fixed assets rather than day-to-day expenses: working capital and inventory are excluded.
SBA states on its 504 page: “Loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities.” A nonprofit’s charitable mission does not override these borrower rules.
The limited exception: Microloans for certain childcare centers
SBA’s Microloan program includes certain not-for-profit childcare centers alongside small businesses. This is a specific exception, not a route for nonprofits generally. The SBA page describes Microloans of up to $50,000 and gives an average loan amount of about $13,000; that average is undated on the page and should not be treated as a current, dated benchmark.
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Microloans are administered through SBA-funded nonprofit community intermediaries. A childcare center applies to an SBA-approved intermediary, which can explain its requirements and assess whether the particular center qualifies.
What if a nonprofit has an affiliated for-profit business?
Do not assume that an affiliated company qualifies—or that it is disqualified—solely because of its connection to a nonprofit. The relevant applicant is the legal entity seeking the loan, and SBA eligibility can depend on its income-generating activity, ownership character, location, size, ability to repay, and business purpose. Public program descriptions do not resolve every affiliation or ownership scenario.
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- Enough forms for 1 year for churches of approximately 150 members
- 5 3/16" x 9"
- Includes forms for church receipts, member contributions, and disbursements
- Identify the exact legal entity that would sign for and repay the loan.
- Describe which entity earns the income and carries out the activity the loan would support.
- For a possible Microloan, establish whether the applicant is a qualifying not-for-profit childcare center.
- Match the planned spending to the program’s permitted uses, especially the 504 fixed-asset restriction.
Ask the lender, CDC, or Microloan intermediary to review the exact structure under current SBA requirements rather than relying on the nonprofit’s mission or affiliation as a proxy for eligibility.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to find the right application channel
- For 7(a): Contact a participating SBA lender or use SBA’s Lender Match. The lender provides the requirements for the specific loan.
- For 504: Contact a Certified Development Company, which works with a private lender to deliver the financing.
- For a qualifying childcare center seeking a Microloan: Contact an SBA-approved Microloan intermediary and ask it to assess the applicant’s status and proposed use of funds.
Overall eligibility is case-specific. SBA identifies factors such as income-generating activity, ownership, location, size, repayment ability, and sound business purpose; the relevant lender or intermediary can explain the requirements that apply to the application.
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