SBA 7(a) Loan Overview
What Does The SBA Look For In An Applicant?
- Demonstrate ability to repay with cash flow
- Be a person(s) of good character
- Management capability
- Borrower’s equity contribution
- Owners of 20% or more required to personally guarantee the SBA loan
- Demonstrate a need for desired credit
How Can Funds From The SBA 7(a) loan Be Used?
- Buy machinery and equipment
- Business expansion
- Purchase existing business, including buyouts
- Augment working capital
- Refinance debt
- Start a franchise or new business
- Make leasehold improvements/build out including remodeling or renovation
- Refinance any outstanding venture capital debt to less expensive SBA debt
- Purchase owner-occupied commercial real estate
Who Is Eligible For A 7(a) Loan?
- Operate a for-profit business
- Engaged in or proposed to do business in the US
- Possess reasonable owner equity to invest
- Exhibit management capability and reasonable experience in the industry
- Demonstrate a need for the loan
Are There Eligibility Guidelines?
Lenders apply the same criteria that they would with a traditional loan, but thanks to the SBA guaranty, some standards may be relaxed. The lender will judge a business based on several factors:
- Equity investment: The more "skin-in-the-game" an owner has, the better.
- Cash Flow: Does the business plan show enough cash flow to meet the debt obligation?
- Collateral: Do the borrowers own anything of monetary value that can be used as collateral in the event of default?
- Management: Do the borrowers have sufficient experience or background?
What Are The Interest Rates And Term Of Loan?
- 2.75% above Prime adjusted quarterly
- Amortization is 25 years maximum on fixed assets. Ten years maximum on working capital, or a blend for a mixed use of funds.
- Processing fees — 2% guarantee on loans under $150,000, and up to 3.75% on higher amounts.
- Other expenses include usual and customary legal and closing costs.
What Are The Loan Amounts?
- As little as $50,000, and as much as $5 million.
Are There Any Geographic Limitations?
- There are no location limitations. The SBA 7(a) loan can be originated in St. Louis for businesses located anywhere in the United States.