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Obtaining financing for 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 – its SBA’s primary and most popular program. Here’s some insight to see if this is the right option for you.The information below is an overview of the SBA 7(a) loan programs features.
The Small Business Administration (SBA) 7(a) Loan Guarantee program is one of the most popular loan programs offered by the agency and is the basic SBA loan program. A 7(a)-loan guarantee is provided to lenders to make them more willing to lend money to small businesses with “weaknesses” in their loan applications.
For example, a business startup would not have cash flow history to provide a lender with the assurance of continued ability to pay back a loan, so the SBA 7(a) loan would serve to provide the lender with an increased guaranty against default. The SBA warns, though, that lenders do not have to accept 7(a) loans.
Interest rates are generally adjustable based loans, tied to the Prime Index rate. Maturities up to 25 years are available based on use of loan proceeds. Fees are based on the total loan request and calculated on the guaranteed portion of the loan. The SBA fees are not currently being charged as part of the American Reinvestment and Recovery Act.
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.
To find out if you qualify for the SBA 507(a) loan program call our office at 800-510-2214 to speak with one of our commercial loan Advisors or click here to set up a free consultation to get prequalified Disclaimer: Loan program parameters subject to change without notice.