What Is an SBA 7(a) Loan?

An SBA 7(a) Loan May Help Your Business Succeed

A barista working at a small coffee shop, started using an SBA 7(a) loan.

2019精品国产品在线不卡 Brooke Cagle/Unsplash

Running a small business can be tough, especially in times of uncertainty and loss of revenue. One port in the storm could be an SBA loan. The SBA's "do everything" 7(a) loan could help you get back on your feet.

What Is an SBA 7(a) Loan?

The Small Business Administration (SBA) 7(a) Loan Guarantee program is one of the most popular loan programs offered by the agency and is the basic SBA loan program.

2019精品国产品在线不卡When you apply for an SBA 7(a) loan, you work with a lender and the SBA participates by giving a guarantee and requiring additional application documents.

If you have an existing SBA (a) loan, you may qualify for relief during COVID-19. To help small businesses during this time, the the principal, interest, and fees of all current 7(a), 504, and microloans for up to six months. The SBA will also pay the principal, interest, and fees of new 7(a), 504, and microloans that are issued prior to Sept. 27, 2020. This relief is automatic.

New Loan: Coronavirus Paycheck Protection Program

2019精品国产品在线不卡To help companies and employees during the coronavirus pandemic, the SBA has a new loan called the . The loan is designed to give an incentive to small businesses with under 500 employees to keep workers on the payroll. Businesses with more than 500 employees may also be eligible if they are in certain industries, including food and accommodations.

There are no fees on the loan and you don't need to have collateral or give a personal guarantee, Your loan can be fully refundable if you use at least 75% of the loan amount for keeping or quickly rehiring employees and you keep their salary levels the same. The loan can also be used to pay interest on mortgages, rent, and utilities. Faith-based organizations may also receive Paycheck Protection Program loans.

You can apply through any 7(a) lender, or check with your current lender to see if they participate. Paycheck Protection Program loans are available as of April 3, 2020, through June 30, 2020. However, as of April 16, 2020, the SBA announced that the program reached its funding cap. For now, the SBA cannot accept any new applications but will continue focusing on those that have already been submitted. The Balance is monitoring the situation and will update content accordingly as new funding becomes available.

2019精品国产品在线不卡Some of the details of the standard SBA 7(a) loan (described below) have been changed or waived for Paycheck Protection Program loans. Check out the on the SBA website for more details on this loan and the .

How Much Can You Get With an SBA 7(a) Loan?

Standard SBA 7(a) loans are for a maximum of $5 million, with an SBA loan guarantee of 85% for loans up to $150,000 and 75% for loans greater than $150,000. The terms of SBA 7(a) loans are 25 years for real estate and 10 years for equipment, working capital, or inventory.

The SBA sets a maximum interest rate, but you and your lender can negotiate within that limit. Interest rates are based on the prime rate, the size of the loan, and the maturity of the loan.

Eligibility Requirements for a 7(a) Loan

For your business to be eligible for a 7(a) loan:

  • You must be defined as a (depending on your industry) to be eligible for the 7(a) loan program.
  • In addition, your business must be operating for profit within the U.S. or its territories.
  • You must have the resources to invest your assets in your business, and you must show that the loan is for a sound business purpose.
  • You must not be delinquent on any existing debt obligations to the U.S. government (such as student loans)
  • You must have used other financial resources before applying for this loan.

Most types of businesses are eligible, except for real estate investment firms and other speculative businesses, dealers in rain coins and stamps, lending companies, pyramid sales companies, companies that engage in illegal activities or gambling, and non-profit organizations.

The 7(a) loans may be used for such business purposes as purchasing land or buildings, equipment, machinery, and/or supplies; long-term or short-term working capital; refinancing; or the purchase of an existing business.

In addition to completing a and an, you will also need the typical documents for a business loan, including your and financial information about your business.

How to Get an SBA 7(a) Loan

2019精品国产品在线不卡The SBA does not directly lend money to small businesses. You must first find an SBA-approved lender and work through this lender. The lender will ask you to complete an application for a 7(a) loan, and you will work with the lender on the paperwork required by the SBA. 

How Long Does It Take to Get an SBA 7(a) Loan? 

The SBA says 7(a) loan turnaround time is 5-10 business days, but every case is unique and there may be times when many businesses are applying for loans. The SBA Express loan described below has an accelerated turnaround time for SBA review.

Types of SBA 7(a) Loans

2019精品国产品在线不卡In addition to the standard 7(a) general and PPP loans described above, other 7(a) loans are available for specific funding needs.

  • 7(a) Small loans have a maximum of $350,000.
  • SBA Express loans have a short turnaround, and the SBA says it will respond to your application within 36 hours. The maximum loan is $350,000. It can be used for a revolving line of credit for up to 7 years.

Check out the SBA's , designed to supplement the SBA's direct disaster loan program and give quick funding to small businesses that apply for disaster loans. It gives an expedited SBA-guaranteed bridge loan of up to $25,000 to small businesses in Presidentially-declared disaster areas.

  • Export Express loan: This program is for exporters who need loans and lines of credit up to $500,000, which is the maximum loan amount.
  • Export Working Capital: This loan is for businesses that need additional working capital to support their export sales. Loans are available through the U.S. Export Assistance Center for up to $5 million.
  • International Trade Loans: These loans are long-term loans to businesses that are expanding because of export sales or adversely affected by imports and need to modernize to meet foreign competition.
  • Veterans Advantage Loans: These loans are available to businesses that are at least 51% veteran-owned and controlled.
  • CAPLines: This is an umbrella program that helps small businesses meet short-term and cyclical working capital needs. It includes four lines: Seasonal, Contract, Builders, and Working.

Article Sources

  1. U.S. Small Business Administration. "." Accessed April 22, 2020.

  2. U.S. Small Business Administration. "." Accessed April 22, 2020.

  3. 2019精品国产品在线不卡U.S. Small Business Administration. "." Accessed April 22, 2020.

  4. 2019精品国产品在线不卡U.S. Small Business Administration. "." Accessed April 22, 2020.