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What is SBA 7(a) Loan Program

By Jim Antonilli
Filed under: Business Loans SBA         Words in this Post: 426



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The SBA offers a variety of financing options for small businesses. The SBA does not finance loans, but they usually provide loan guaranties to the Banks and Financial Institutions and other private lenders that actually make loans to small business clients. To qualify for a SBA guaranty, a small business must meet the 7(a) criteria, and the lender must certify that it could not provide funding on reasonable terms except with a SBA guaranty. The SBA can then guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on loans of more than $150,000.

Length of time of Repayment (Usually referred to as ‘Loan Term’]
The length of time for repayment depends on the use of the proceeds and the ability of your business to repay: usually five to ten years of working capital and up to 25 years for fixed assets such as the purchase or major renovation of real estate or the purchase of equipment (not to exceed the useful life of the equipment).

Interest Rates
Both fixed and variable interest rates are available. Rates are pegged at no more than 2.25 percent over the lowest prime rate for loans with maturities of less than seven years and up to 2.75 percent for seven years or longer. For loans under $50,000, rates may be slightly higher.

Loan Fee [commonly referred to as “Points’]
The SBA charges the lender a nominal fee to provide a guaranty, and the lender may pass this charge on to you. The fee is based on the maturity of the loan and the dollar amount that the SBA guarantees. On a loan with a maturity of one year or less, the fee is just 0.25 percent of the guaranteed portion of the loan. On loans with maturities of more than one year, the guaranty fee is 2 percent on loans up to $150,000; 3 percent on loans over $150,000 but not over $700,000; and 3.5 percent on loans over $700,000

Loan Application and Loan Requirements
The agency’s most popular lending initiative is the Low Doc program. The program is for loan requests of $100,000 or less and features a one-page SBA application.

Types of Loans [Types of Projects]
Many different types of Projects or Business acquisitions qualify under various SBA programs. SBA guarantees loans that range from long-term loans for Business Acquisition, Business + Land Acquisition, Business Start-ups, purchase of machinery and equipment to short-term loans for general working capital, revolving lines of credit, and microloans, the SBA has a variety of financing programs to fit your needs.

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Author: Jim Antonilli

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