Need Assistance For Your Small Business?
The US Small Business Administration (SBA) is a federal agency with the main purpose of helping small businesses get the financial assistance they need to grow. The SBA 7A Loan is considered the gold standard of business loans. Compare the best SBA loan options with Upwise.
What are SBA 7 A loans?
SBA loans are business loans guaranteed by the Small Business Administration. SBA guaranteed loans can range from small to large and can be used for most business purposes. With their multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender— such as Upwise. The SBA agency reduces risk and enables easier access to capital for small business owners across the United States. The three main SBA loan programs let you borrow money for nearly any business purpose—including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate—through these SBA-guaranteed loans. Take into account that some SBA loan programs set restrictions on how you can use the funds, so make sure to check with your Upwise SBA loan specialist.
SBA 7(a) loans are issued by a private lender and backed by the SBA (small business administration), a government agency. Even though “7(a) loan” is sometimes used as an all-encompassing term, the SBA 7(a) program consists of several different loan types (more on these below).
To apply for your 7(a) loan, you’ll work with an SBA lending partner, like a bank or credit union, to complete an application. The lender will submit your application and required documents to the SBA in order to receive an offer; this way, if you default on the loan, the SBA will repay the lender the guaranteed amount.
The SBA dictates the general guidelines for the 7(a) program that lenders must abide by, governing the maximum loan amounts, term lengths, and interest rate; The participating lender will give you the specifics of your SBA 7(a) loan.
7 A Loan Program Details
SBA 7(a) Loan Types
The Small Business Administration lists different kinds of 7(a) loans on its website. They each as created to meet different needs, so businesses in some industries may find that one 7(a) loan is better structured for their particular businesses than others.
These are the most applied for loans. The maximum amount of Standard 7A loans is $5 million dollars. This loan will provide 85% of a loan up to $150,000 and 75% of a loan greater than $150,000. the use of funds is very wide here are some examples of what the funds could be used for Business expansion, cash flow, and hiring. Application turnaround time from the SBA 7A is 5-10 business days.
7(a) Small Loan
The maximum loan amount of the small loan program is $350,000 but besides that, they share the same features of a Standard 7A loan. The SBA will cover 85% of a loan up to $150,000 and 75% of a loan greater than $150,000. some examples for use of funds for a 7 A loan are Cash flow, expansion, and payroll. Application turnaround time from the Small SBA 7 A loan program is 5-10 business days.
SBA Express Loan
As the name states, this loan has the shortest turnaround of SBA loans. The small business Administration will get back to you within 36 hours. The maximum amount is $350,000 and the SBA will cover only 50% of the funds. Uses for an SBA Express Loan Providing short-term and long-term payroll, Accounts payable, Purchasing inventory, and Seasonal financing.
Export Express Loan
SBA Export Express offers flex terms and ease of use to both borrowers and lenders. It is the easiest export product offered by the SBA and allows participating lenders to use their own forms, procedures, and analyses. The SBA typically responds to an application in 36 hours or less. The maximum loan amount is $500,000 and the SBA will cover is 90% for loans of $350,000 or less and 75% for loans more than $350,000. The funds from a loan of this type range from finance-specific export orders, as well as to finance expansions, equipment purchases, and inventory or real estate acquisitions, etc.
Export Working Capital Loan
Export Working Capital Loan from the SBA provides lenders with up to a 90% guaranty on export loans as a credit enhancement so that the lenders will make the necessary export working capital available. The Export Working Capital has a maximum loan amount of $500,000 where the small business administration will cover 90% for loans of $350,000 or less and 75% for loans more than $350,000. This is the loan has one of the quickest turnaround processes of 24 hours. the funds can be used for Financing for suppliers, and inventory or production of export goods.
International Trade Loan
International Trade loans provide long-term financing to businesses that are expanding because of growing export sales, or that have been adversely affected by imports and need to modernize to meet the foreign competition. This type of loan has a maximum loan amount out at $5 million dollars and the SBA will cover up to 90% of the loan no matter the amount loaned. This loan has an average turnaround time of 5-10 days these funds can be used to acquire, construct, renovate, modernize, improve or expand facilities or equipment in the U.S. to produce goods or services involved in international trade.
SBA CAP Lines of Credit
The CAP Lines program is designed to help small businesses meet their short-term and cyclical working capital needs. This loan’s maximum amount loan is$5million dollars and the SBA covers 90% of the loan. The turnaround time for this type of loan is around 5-10 days. These funds can be used for commercial builders, seasonal businesses, businesses that are fulfilling government contracts, and businesses with cyclical gaps in cash flow to cover working capital needs.
How can I use an SBA 7 A Loan?
A Small Business 7 A loan can be used for a wide range of expenses below you will see an example of some of them:
- Expand, acquire or start a business
- Purchase or construct real estate
- Refinance existing business debt
- Buy equipment
- Provide cash flow
- Construct leasehold improvements
- Purchase inventory
SBA 7 A Loan Eligibility Requirements
Below you will find some of the Eligibility requirements for small businesses:
- A good credit score – preferably above 680.
- A history free from recent bankruptcies, foreclosures, or tax liens.
- Having been in business for at least two years.
- You must be officially registered as a for-profit business, and you must be operating legally.
- As the business owner, you can’t be on parole.
- Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years
- Your net income must be under $5 million (after taxes and not counting carry-over losses), and your tangible net worth must be less than $15 million.
- You must show you’re investing your own time and money into the business, having “invested equity.”
- Your business must be physically based in the United States, and you must be doing business with the U.S. and its territories.
- Your small business must be in an SBA-eligible industry (speculative, illegal, and non-profit businesses don’t get to play). Learn more about Eligible and Ineligible Industries for SBA 7(a) Loans
- You’ll need to show that you’ve already tried and failed to get funds from other financial lenders, fully exhausting non-SBA loan options.
- You’ll need to prove you’ve got a sound business purpose for the loan you’re requesting, and that your intended fund’s usage is approved by the SBA.
- You’ll need to prove you’re not delinquent on any existing debts to the U.S. government (taxes, student loans).
Who is eligible for SBA 7 a Loan?
While the vast majority of businesses are eligible for financial assistance from the SBA, some are not.
Eligible businesses must:
- Operate for profit
- Be engaged in, or propose to do business in, the U.S. or its territories
- Have reasonable owner equity to invest
- Use alternative financial resources, including personal assets, before seeking financial assistance
- Annual sales not to exceed the range of $750,000 to $33.5 million for retail, service, and agriculture
- Number of employees not to exceed the range of 100 to 1,000 for wholesale and manufacturing
What are the SBA 7 A Interest Rates and Terms?
Interest rates are negotiated between the borrower and the lender but are subject to SBA maximums, which are pegged to the prime rate, the LIBOR rate, or an optional peg rate. Interest rates may be fixed or variable.
Term is less than 7 years
Term is more than 7 years
$25,000 or less
Base rate plus 4.25%
Base rate plus 4.75%
$25,000 to $50,000
Base rate plus 3.25%
Base rate plus 3.75%
$50,000 or more
Base rate plus 2.25%
Base rate plus 2.75%
What are the Fees on SBA 7 A Loans?
When the Small business approves a loan, they will back between 75%-85% of the loan. The SBA calculates the fee to be charged depending on the amount of the loan that they back. The great thing about an SBA 7 a loan is that as per the Small business administration’s site Lenders can’t charge a separate loan origination fee on an SBA guaranteed loan.
Lenders can charge ‘packaging fees,’ but the fees must be reasonable and customary for the services actually performed and must be consistent with those fees charged on the lender’s similarly-sized non-SBA guaranteed commercial loans.
What are the Pros and Cons of SBA 7 A Loans?
SBA 7(a) loan PROS include:
- Highly competitive, low-interest rates
- Long loan terms, up to 25 years
- Fixed and variable-rate options are available for those eligible
- 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 CONS 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+)
- Maybe restrictions on supplemental/additional financing
Is an SBA 7(a) Loan a Good Choice
The benefits of an SBA 7A Loan to small businesses
- Flexible structure
- Up to 90% financing
- Lower down payment compared to other financing options
- Lower monthly payments
- Offer variable and fixed-rates
- Loan terms of 5 to 25 years:
- 5 to a 7-year term for working capital
- Up to 10 years for business acquisition or equipment financing
- Up to 25 years for real estate
What equipment can be purchased with an SBA 7 A loan?
Now, below are just a few examples of equipment you might buy within industries that do qualify for an SBA loan:
- Accounting and financial: new computer systems, furniture, office equipment
- Agriculture & agribusiness: tractors, generators, milking equipment
- Construction: lifts, tools, safety gear, cranes, and other machines
- Education: subject textbooks, dry erase boards and electronic boards, utensils
- Entertainment, arts, recreation, and sports: lighting and sound gear, uniforms, recording studio equipment
If approved how long does it take to get SBA 7 A loans?
The time to turn around an SBA 7 A loan is typically between 5-10 days there may be special cases where businesses may experience longer or shorter times. However, the SBA loan process can be document heavy. This is what can delay the process because it takes time for the business owner to gather the required documents. The more readily available your documents are, the faster you’ll move through the process.
How can I apply for an SBA 7 A loan?
We make it easy, simply apply online and we’ll be in touch to go over your options.
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Documents You'll Need to Apply
- Completed Application
- Driver’s License
- Voided Business Check
- Business Bank Statements (Last 6 Months)
- Credit Application
- Balance sheets
- Profit & Loss Statements
- 2 Years Business Tax Returns
- 2 Years Personal Tax Returns
- Account Receivables Report (if securing AR)
- Inventory List (if securing inventory)
- Equipment List (if securing equipment)
- Collateral Information
*See above for SBA loan requirements.
Take advantage of Upwise Capital’s easily accessible SBA 7 A loan program right now. Our team of funding experts will put together a list of products and lending solutions. Help is just a few clicks away. Simply fill out our Funding Application Form right now or call us on the phone at 775-5-UPWISE (879473) to get approved for sba 7 a loans within 24 hours.