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SBA 7a LOAN

SBA Consultant

SBA 7(a) Loan

The 7(a) loan program is the SBA's primary program for providing financial assistance to small businesses. The terms and conditions, like the guaranty percentage and loan amount, may vary by the type of loan. SBA's available types of 7a loans include:

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  • Standard 7(a)

  • 7(a) Small Loan

  • SBA Express

  • Export Express

  • Export Working Capital

  • International Trade

  • Preferred Lenders

  • Veterans Advantage

  • CAPLines

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SBA CONSULTANT wants to be your loan strategy expert. Call us today to schedule an appointment.

SBA 7A LOAN - Popular Small Business Loan Program

Why is SBA's 7(a) loan program so popular? If you’re thinking about applying for an SBA 7(a) Loan, you’re in good company – the 7(a) is one of the SBA’s most popular programs. It can feel like you’re being held back without access to more working capital, so the SBA offers small business owners (like you!) support when you haven’t been able to find funding elsewhere. Just because you’re lacking cash flow history or a pristine credit score doesn’t mean you must automatically give up on your dreams! If you apply and are approved, the SBA will guarantee (like co-signing) a loan from an SBA-approved lender for up to 90% percent of your loan amount – quite a sweet deal for startups or small businesses if you’re looking to make a leap in your growth. 

SBA 7(a) LOAN - Basic Size Qualifications

What are SBA 7(a) loan qualifications pertaining to size of the business? Even if you already fall under the SBA definition of a small business, your particular industry may have additional industry-specific requirements, which mainly concern number of employees and revenue/receipts. The SBA has two main standards for business size – fewer than 500 employees for manufacturing and mining industries, and under $7.5 million in average annual receipts for non-manufacturing industries.  There are of course exceptions, so you’ll want to check with the SBA’s size requirements for your specific industry. 

SBA 7(a) LOAN - Eligibility Requirements

Does my business qualify for an SBA 7(a) Loan? If you’re looking for a 7a loan from the SBA, they’ve got some requirements you’ll need to make sure you meet:

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You must be officially registered as a for-profit business, and you must be operating legally.

As the business owner, you can’t be on parole.

 

Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years

 

Your net income must be under $5 million (after taxes and not counting carry-over losses), and your tangible net worth must be less than $15 million.

 

You must show you’re investing your own time and money into the business, having “invested equity.”

 

Your business must be physically based in the United States, and you must be doing business with the U.S. and its territories.

 

Your small business must be in an SBA-eligible industry (speculative, illegal and non-profit businesses don’t get to play). Learn more about Eligible and Ineligible Industries for SBA 7(a) Loans

 

You’ll need to show that you’ve already tried and failed get funds from other financial lenders, fully exhausting non-SBA loan options.

 

You’ll need to prove you’ve got a sound business purpose for the loan you’re requesting, and that your intended funds usage is approved by the SBA.

 

You’ll need to prove you’re not delinquent on any existing debts to the U.S. government (taxes, student loans).

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SBA 7(a) LOAN - Other Beneficial Business Qualities

What other beneficial business qualities does the SBA look for to be approved for an SBA 7(a) Loan? As per the Small Business Administration guidelines, in addition to the eligibility requirements listed above, there are a few additional qualities which can increase your likelihood of SBA 7(a) loan approval

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A good credit score - preferably above 680.

 

A history free from recent bankruptcies, foreclosures, or tax liens.

 

Having been in business for at least two years.

 

The ability to provide collateral for loan requests over $25,000.

 

The ability to make a down payment of 10% if your intended use of funds is to purchase a business, commercial real estate, or business-related equipment.

 

Sufficient cash flow to meet your debt obligations.

 

Sufficient working capital (once you subtract liabilities from assets).

 

“Good character” according to the SBA (partially decided based on your track record of managing your resources and day-to-day business affairs).

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If the business applying for the SBA 7(a) Loan is unable to check all of the above, the business is not automatically disqualified from the program.

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Allowable Uses of Funds

Working Capital

Purchase Equipment

In order to get approved for an SBA 7(a) loan, you’ll need to prove that your plans for the funds are appropriate.  While the specific allowable uses depend on the amount you want to borrow, you can generally use SBA 7(a) funds for operational expenses, refinancing certain high-cost debts, hiring employees, purchasing new inventory or equipment, supporting marketing costs, or even purchasing land and commercial real estate.

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Collateral Requirements

Case by Case Basis

Lender May Require It

While the SBA guarantees a large percentage of an SBA 7(a) loan, your lender is still on the line for the remaining percent. The collateral you provide is split between the SBA and your lender; offering collateral instills confidence in recovery should you default.  showing the SBA that you’re fully invested in the success of your business by putting up collateral definitely increases your chances of approval and success. 

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Guidelines For Startups

I am Starting a New Company, Do I Qualify?

Maybe, but the process will certainly be a little more challenging!

 

Startups are generally seen as risky investments; 50% of small businesses fail within the first five years. SBA 7(a) loans minimize the risk to lenders, so lenders working with the SBA are more likely to give out riskier startup loans. By offering collateral you can convince your lender that your business has potential and you’re serious about it.

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STANDARD 7(a) Business Loan

The Standard 7(a) Program allows loan amounts up to $5 million, The Maximum SBA guarantee percentage is 85% for loans up to  $150,000 and 75% for loans greater than $150,000. Although lenders are not required to take collateral for loans up to $25,000, higher amounts mean that the lender will require sufficient  collateral to secure their investment.

SBA 7(a) Small Loan Program

This program has a maximum loan amount of $350,000. Unfortunately, the maximum SBA guarantee percentage on this type of loan is only 50%, meaning that your business will require a lot of collateral to secure the loan. The credit decision is made by the lender.

SBA EXPRESS LOAN

The SBA Express program features an accelerated turnaround time for SBA review. The SBA will generally respond to the application within 36 hours, provided the application is coherent and is prepared properly.

DISASTER RELIEF LOAN COLLATERAL

Loans which exceed $25,000 must be secured to the extent possible. SBA will not decline a loan if you don’t have enough collateral, but will ask for whatever collateral is available which may include real estate owned by a business’ principals. For individuals, SBA may also take a lien on any damaged residential property.

FOR A FREE CONSULTATION 

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Initial consultation is always FREE!

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