An SBA 7(a) loan is a federal government guarantee of a small business loan. Although the loan itself comes from a private lender, owners who qualify for SBA 7(a) loans have a significant portion backed by the government, making it much easier for businesses with less access to capital or problems with credit to receive financing.

Loans of up to $5 million qualify under SBA 7(a), with the SBA providing a guarantee of up to $3.75 million, or 75%. For loans worth less than $150,000, the government will back up to 85% of the debt. To qualify under this program, borrowers must meet SBA standards of being a small business, not have defaulted on previous government loans, and demonstrate the ability to repay the loan.

While there is a prepayment penalty on loans that mature beyond 15 years, there's no prepayment penalty for shorter-term loans. SBA 7(a) doesn't have a balloon payment, and provides improved cash flow for the business. SBA 7(a)-backed loans can be used for various business purposes, including renovations, capital purchase, seasonal lines of credit, or refinancing of existing debt.

To learn more about the SBA 7(a) loan program or to apply for a free quote, simply click the button below!

The eligibility requirements for an SBA 7(a) loan include:

• The business must meet the SBA's size standards for its particular industry.
• The business must have fewer than 500 employees and less than $7.5 million in revenue each year for the previous three years.
• The business must physically be based in the U.S. and operate within the U.S. and its territories.
• The business must operate for profit.
• Business owners must first have used other sources of financing, including personal funds, in order to qualify.
• Businesses must not be involved in lending, real estate, or speculation.
• Your business must operate for profit. Nonprofits and not-for-profit businesses are not eligible.
• You must also have some equity in the business — this could mean you already have a profitable business, or you could use your own personal equity as collateral.
• If you have any alternative financial resources, you must have used them first. For example, if you have a personal savings account or are able to get a personal loan, then you must first pursue those options before applying for an SBA 7(a) loan.
• The business owner cannot be on parole.
• You must be doing business in the U.S. or its territories.

The advantages of an SBA 7(a) loan include:

• Highly competitive, low interest rates
• Long loan terms, up to 25 years
• Fixed and variable-rate options are available
• A variety of businesses are eligible
• Low down payments, typically around 10-20%
• Variety of loan options, including SBA 7(a) express loans, SBA 7(a) CAPLines
• Most SBA loans, including 7(a) loans are fully amortizing, meaning borrowers don’t have to worry about balloon payments

SBA 7(a) loan disadvantages include:

• Lengthy approval times (for standard SBA 7(a) loans)
• Lots of documentation
• Collateral is often required
• Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
• High credit scores are typically required (typically 680+)
• May be restrictions on supplemental/additional financing

Source: www.sba7a.loans/sba-7a-loans-small-business-blog/pros-and-cons

Source: www.commercialrealestate.loans/blog/difference-between-sba-7a-and-sba-504-in-cre

The maximum loan amount for an SBA 7(a) loan is $5 million. The loan has no minimum, which is good news for small businesses. For example, in 2010, a small business in eastern Missouri obtained a $5,000 SBA 7(a) loan.

If you need more than the max amount of $5 million, the SBA 504 program or another loan is a better fit.