SBA 7a

Obtaining financing for your business ventures is often challenging for entrepreneurs. From being in the startup phase to growing your business, you may face difficulties with the requirements of traditional bank loans. But the 7(a) Program may be able to help – it’s SBA’s primary and most popular program. Here’s some insight to see if this is the right option for you.

Am I eligible?

If you can demonstrate a need for funds and have a sound business purpose in mind, you’re on the right track. To be considered eligible for the SBA 7(a) Loan Program, your business must meet SBA’s size standards and be considered small within your particular industry, operate for profit and you must have reasonable equity to invest. You’re also required to do, or propose to do business, in the United States or its possessions. Another eligibility requirement is that you must have tried to use other financial resources, including personal assets, before applying for a loan.

How can I use 7(a) funds?

The 7(a) Program lets you get loan amounts (up to $5 million) to fund startup costs, buy equipment and more. Here’s what else you can do with 7(a) funds:

  • Purchase new land (including construction costs)
  • Repair existing capital
  • Purchase or expand an existing business
  • Refinance existing debt
  • Purchase machinery, furniture, fixtures, supplies or materials

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What are the benefits?

The 7(a) Program offers flexibility, longer terms and potentially lower down payments compared to other financing options. There are also specialized programs for individuals interested in exporting; those located in underserved communities; members of the military community; and small businesses owners looking to meet their short-term and cyclical working capital needs.

What are the repayment terms?

Most 7(a) term loans are repaid with monthly payments of principal and interest. For fixed-rate loans, the payments stay the same because the interest rate is constant. For variable-rate loans, the lender can require a different payment amount
when the interest rate changes.

What else should I know?

Keep in mind that SBA doesn’t fund these loans directly to small business owners, but banks and lenders receive a guarantee that the SBA will repay a portion of the loan if you default on payments.

SBA 504

The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. This program is a proven success and win-win-win for the small business, the community and participating lenders. The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. 
The use of proceeds from 504 Loans must be used for fixed assets (and certain soft costs), up to $10 million including:

  • The purchase of existing buildings;
  • The purchase of land and land improvements, including grading,
    street improvements, utilities, parking lots and landscaping;
  • The construction of new facilities or modernizing, renovating or
    converting existing facilities;
  • The purchase of long-term machinery* ; or
  • The refinancing of debt in connection with an expansion of the
    business through new or renovated facilities or equipment*.

The 504 Program cannot however be used for working capital or inventory, consolidating or repaying debt, or refinancing (except for projects with an expansion component or that meet the temporary refinancing provisions of the Small Business Jobs Act of 2010). 
The 504 Loan program offers small businesses both immediate and long-term benefits, so business owners can focus on growing their business.  Some of the top-level benefits include:

  • 90% financing;
  • Longer loan amortizations, no balloon payments;
  • Fixed-rate interest rates; and Savings that result in improved cash flow for small businesses.
  • Minimum DSCR: 1.1x for General Purpose Properties; 1.25x for Special Purpose Properties.
  • Minimum FICO: 650 (if under, MUST explain in detail with documentation).
  • Maximum LTV: 65% on first lien loans nationwide.
  • All loans are on a 25 Yr. amortization with 10-year terms (if property is older than 30 years, a 20-year amortization may apply).
  • Loan Amounts: up to $10MM for first lien loans (up to $20MM total SBA 504 or Conventional loan project costs); up to $5.5MM for interim second lien loans on SBA 504 projects.
  • Use of Proceeds: Acquisition, Renovations, Ground-Up Construction, and Refinancing.
  • Borrowers can prepay up to 20% per year (on 5-year fixed rate loans) toward outstanding principal balance without triggering PPP.
  • Targeted Fee-Simple Property Types: Office Buildings; Medical Offices; Industrial Warehouses; Flagged Hotels (interior corridor); Franchised Free-Standing Restaurants; Daycares; Assisted Living Facilities; Retail; Auto; Self-Storage; Urgent Care/Surgery Centers; Funeral Homes; etc.
  • Underwriting timeframe: Detailed Approval Letter issued within 24 hours of receipt of all necessary Approval docs (unless utilizing Pronto, in which case two-hour approvals are standard); Commitment Letter issued within 48 hours of complete submission and all conditions met. Closings expected within 30 to 45 days (subject to SBA approval, if applicable).

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We offer free consultations for all products and services. We will help you think through your
ideas and provide examples for how we can fund your request.

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