7(a) Loan Program
The 7(a) Loan Program includes financial help for businesses with special requirements. For example, funds are available for loans to businesses that handle exports to foreign countries, businesses that operate in rural areas, and for other very specific purposes.Special Purpose Loans Program
SBA offers several special purpose 7(a) loans to aid businesses that have been impacted by NAFTA, to provide financial assistance to Employee Stock Ownership Plans, and to help implement pollution control mechanisms. ...
- SBA's Express programs offer streamlined and expedited loan procedures for particular groups of borrowers, notably active duty military personnel, veterans, and borowers from distressed communities. SBAExpress The...
- Approximately 70 percent of all U.S. exporters have 20 or fewer employees. SBA has placed a priority on helping these small business exporters by providing a number of loan programs specifically designed to help them develop or...
- Rural Lender Advantage The Small/Rural Lender Advantage (S/RLA) initiative is designed to accommodate the unique loan processing needs of small community/rural-based lenders by simplifying and streamlining loan application process...
- If you are awarded a 7(a) loan, the loan proceeds may be used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business. Eligible Use of 7(a) Loan Proceeds Include (Non-...
- Small Loan Advantage and Community Advantage 7(a) Loan Initiatives SBA is committed to expanding access to capital for small businesses and entrepreneurs in underserved communities so that we can drive economic growth and job...
Special Purpose Loans Program
SBA offers several special purpose 7(a) loans to aid businesses that have been impacted by NAFTA, to provide financial assistance to Employee Stock Ownership Plans, and to help implement pollution control mechanisms. ...
- SBA's Express programs offer streamlined and expedited loan procedures for particular groups of borrowers, notably active duty military personnel, veterans, and borowers from distressed communities. SBAExpress The...
- Approximately 70 percent of all U.S. exporters have 20 or fewer employees. SBA has placed a priority on helping these small business exporters by providing a number of loan programs specifically designed to help them develop or...
- Rural Lender Advantage The Small/Rural Lender Advantage (S/RLA) initiative is designed to accommodate the unique loan processing needs of small community/rural-based lenders by simplifying and streamlining loan application process...
- If you are awarded a 7(a) loan, the loan proceeds may be used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business. Eligible Use of 7(a) Loan Proceeds Include (Non-...
- Small Loan Advantage and Community Advantage 7(a) Loan Initiatives SBA is committed to expanding access to capital for small businesses and entrepreneurs in underserved communities so that we can drive economic growth and job...
How The SBA 7a Loan Program Works
SBA 7(a) loans are provided by banks and other lenders who share the risk and receive a percentage guaranty from the SBA. Commercial lenders administer and screen the loan applications, applying the SBA's and their criteria before passing along the loan application to the SBA. The SBA issues a guaranty for a percentage of the loan while the borrower is obligated for the full amount due.
Commercial lenders are in charge of the process, because once they reject an application, the SBA cannot force them to reconsider. The loan applicant must meet the commercial institution's criteria and be creditworthy. Terms of Small Business Administration loans are negotiated between applicants and the participating financial institution, subject to the SBA requirements. Owners are required to establish equity and collateral as well.
SBA Business Loan Eligibility Criteria
A business must meet size requirements, be for-profit, lack available funds from other sources both business and personal, be able to describe use of proceeds and be able to repay.
Loan Character Requirements
Good credit histories with records of on-time payments is what the SBA looks for. Lenders will check credit scores of business principals for indicators of payment behavior predictions before submitting the app to the SBA. The SBA requires a "Statement of Personal History" from each principal covering financial ability and management capability.
Maximum SBA 7a Loan Amounts
- Up to $2 million dollars with an 85% SBA guaranty.
Maturities
SBA loan program maturities are based on ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. Payments are based on level payment plans based on weighted average of maturities or installments with initial payments higher during the initial terms of the loan.
- 25 years for real estate and equipment
- 7 years for working capital.
SBA 7(a) Program Interest Rates
- Fixed or variable rates are negotiated between the borrower and the lender subject to SBA maximums, pegged to the prime rate.
- Fixed rate loans of $50,000 or more cannot exceed prime plus 2.25 percent if the maturity is less than 7 years, and 2.75 percent if the maturity is 7 years or more.
- Loans of $25,000-$50.000 rates cannot exceed prime plus 3.25 percent if the maturity is less than 7 years, and 3.75 percent if the maturity is 7 years or more.
- Loans $25,000 or less, rates cannot exceed prime plus 4.25 percent if the maturity is less than 7 years, and 4.75 percent, if the maturity is 7 years or more.
- Variable rates can be pegged to either the lowest prime rate or the SBA optional peg rate, a weighted average of rates the fed pays for, calculated quarterly and published in the "Federal Register."
Maximum Loan Amounts Available
- 50% for SBA Express loans
- 85% of loans of $150,000 and less
- 75% of loans above $150,000.
- 90% for Export Working Capital Loan Program up to $1,000,000.
Fees
The SBA charges lenders a guaranty and a servicing fee for each loan approved and disbursed, based on the guaranty portion of the loans. The lender can pas this cost to the borrower after the first disbursement of the loan.
- 2% for loans of $150,000 or less
- 3% for loans $150,000+-$700,000
- 3.5% for loans greater than $700,000
- 3.5% for loans of $1,000,000 or less plus .25% for any loan amounts greater than $1,000,000.
- 5% servicing fee for all 7(a) loans approved
