The Small Business Administration’s most popular loan program for small businesses is called the SBA 7A. This is issued by banks, but up to 85% of the loan is insured by the government. 6.5% 10-25 year term  (depending on use of capital)

 

SBA 7(a) loans offer low-interest rates and long terms, making them an ideal form of financing for those who can qualify.

 

The maximum loan amount for 7(a) loan is %5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. Your lender will help you figure out which type of loan is best suited for your needs.

 

The 7(a) is a conservative product and is not easy to obtain. It can take 6-8 weeks to receive funds. SBA 7A is a final goal that we are always looking for our clients to receive. It’s the next step to help generate more revenue for our clients.

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Who Qualifies? Basic Requirements

 

• 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 in revenue on average each year for the past three years

• Your net income must be under $5 million 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 it 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 got a sound business purpose for the loan you’re requesting, and that your intended funds usage is approved by the SBA

• You’ll need to prove you’re not delinquent on any existing debts to the U.S. government 

 

Criteria merchants are graded on to determine their SBA 7(a) Eligibility

 

Cash Flow

Established Businesses - derived by the historical performance of your company using the last 2+ years of your business tax returns, and/or projections. Your projections must be validated and believable. It’s best if your business is profitable on your tax returns and if your business has few debts.

Credit

Each owner with 20% or more equity in the business must personally guarantee the loan. This means your personal assets may be required for collateral. Each owner must have a 640+ credit score with most banks requiring a minimum of 680. Startups usually require 700+.

Character

A personal background check will be performed on every owner with 20% or more equity in the business. Certain criminal records will get you automatically denied. Other questions will be asked to gauge how much experience you have in your industry.

 

Collateral

Typically, at least 75% of the SBA 7A loan is guaranteed by the SBA which means you don’t have to bring as much collateral to the table as a conventional loan. However, depending on the strength of your finances, you may be asked to secure the loan with 100% of your collateral. Examples of collateral include real estate with equity, equipment, inventory, A/R, and life insurance policies.