What is an SBA 7 (a) Loan?
When it comes to helping small businesses expand, the U.S. Small Business Administration backs several various loan programs. The SBA 7 (a) loan program – a general-purpose loan – is one of the most popular programs. Business owners, on average, borrow approximately $350,000 per loan through this loan program.
The SBA (short for Small Business Administration) does not lend directly to small businesses. Banks and other lenders provide the much-needed capital for the loans and a part of the loan is what SBA guarantees. This guarantee ensures that there is less risk to the bank offering the loan. So what you have is a loan with a competitive rate of interest. Also, SBA 7 (a) loans are somewhat easier to qualify for compared to traditional bank loans.
What Purposes Can You Use an SBA 7 (a) Loan?
Taking an SBA 7 (a) loan allows you to use it for:
- Fixtures and furniture
- Equipment and machinery
- Business acquisition
- Real estate (except investment real estate)
- Debt refinancing
- Working capital
What are the Terms to Obtain an SBA 7 (a) Loan?
An SBA 7 (a) loan allows you to borrow up to $5 million with a loan term up to 10 or 25 years (of course, it depends on what you will be using the money for).
What are the Requirements to Obtain an SBA 7 (a) Loan?
There is a set of minimum requirements defined by the SBA when it comes to obtaining an SBA 7 (a) loan. It is mandatory for any business to meet these requirements to be eligible for a 7 (a) loan. Many banks consider various things before making the loan, including an excellent credit score (any FICO score above 680), cash flow, high annual revenue, and established business.
Here’s a list of minimum requirements the SBA has formed for a standard 7 (a) loan:
- Have invested equity in the business
- Demonstrate a need for a 7 (a) loan
- For-profit, operating business in the United States
- Ability to offer collateral for the loan
- Not offending on any debt obligations to the government
- Good character of the owners
- Feasible business plan
- Good personal and/or business credit
What are the Different Types of SBA 7 (a) Loans?
Different types of SBA 7 (a) Loans include Standard 7 (a), 7 (a) Small Loan, SBA Express, Export Express, Export Working Capital, International Trade, Veterans Advantage, and CAPLines.
You can choose the type of an SBA 7 (a) loan, which is designed to meet your unique needs for the type of industry you’re catering to.
Get in touch with Biz Loan Bankers!