• Twitter
  • LinkedIn
  • Facebook
  • Instagram
  • Youtube
Login  | Call now: (800) 780-7133
Kapitus
  • Problems We Solve
  • Products We Offer
  • Partner With Us
  • Blog
  • APPLY NOW
  • Search
  • Menu Menu
Can I Get Approved for the 7a Loan Program

Can I Get Approved for the SBA 7(a) Loan Program

December 11, 2021/in Manage Your Money/by Liz Froment

Any small business owner who spends time searching for small business loans–both through banks and online–has likely come across the SBA 7(a) loan program. It’s one of the more popular small business lending options out there. With that, many small business owners look to the Small Business Administration (SBA) to help with financing.

One way the SBA helps small business owners is through their Loan Guarantee Program. Here, you’ll learn what you need to know about the SBA 7(a) loan program and the requirements for approval.

What is the SBA loan program?

SBA loans don’t actually go through the government. Instead, the SBA offers guarantees to participating lenders, including traditional banks, credit unions, online lenders and private lenders.

The goal is to make small business loans less risky for these lenders. This means that more business owners can secure funding to help grow their businesses.

Guarantees typically cover anywhere from 50 to 85 percent of the total loan amount, depending on the loan. The SBA has a variety of loan options, including the 7(a) program, the 504 program, microloans and disaster loans.

However, the SBA 7(a) program is the focus here.

What is a 7a loan?

SBA 7(a) loans are some of the most popular options available for small business owners. In the 2019 fiscal year, over $23 billion in loans saw approval. An average loan was for just under $450,000.

The flexibility of the 7(a) loan program makes it popular among small business owners. 7(a) loans are guaranteed up to $5 million. For loans up to $150,000, the SBA guarantees 85 percent. The SBA guarantees 75 percent for loans over $150,000, up to $3.75 million on the $5 million maximum loan amount.

If you default, the SBA will pay out the guaranteed amount. It’s one way the administration removes some of the default risks from lenders. This allows them to offer more attractive repayment terms.

Many small business owners would likely struggle to secure financing from traditional financial institutions without the SBA Loan Guarantee Program.

What are the SBA 7a loan terms and interest rates?

SBA loan terms are set with the long-term goals of small business owners in mind. Repayment terms are often based on your particular financial situation. However, most of these are paid back via monthly installments.

The set terms are as follows:

  • Real estate: up to 25 years
  • Equipment: up to 10 years
  • Working capital and inventory: up to 10 years

Another benefit of an SBA loan is that it sets a maximum with lenders on interest rates. Base rates are tied to Prime Rates, benchmark interest rates and additional spread rates.

The spread rate varies depending on the loan amount and the term. Typically, higher loan amounts with shorter terms have slightly lower spread rates.

The SBA has specific spread rates they use. But, the rates can change as the market rates do over time.

Are there fees involved with the SBA 7(a) loan program?

While you typically won’t find origination, application and processing fees with SBA loans, there still are fees to consider.

These fees can include:

  • SBA loan guarantee fees (which vary depending on the size of the loan; but they only apply to the guaranteed amount)
  • Credit authorization fees
  • Packaging fees and closing costs
  • Appraisal fees for real estate related loans
  • Late payment penalties
  • Prepayment penalties which apply to loans longer than 15 years that are prepaid within the first three years

The guarantee fee is the highest of all associated SBA loan fees. Keep these fees in mind as you figure your total payment amount.

The basics of qualifying for SBA 7(a) loans

The SBA has several eligibility requirements you must meet to qualify for any of their loans, including the 7(a). Since these are popular loans, you should understand the different requirements before you apply.

First, your business must be for-profit and based within the United States or its territories. Also, the SBA has size standards they use to ensure that the definition of small business gets met–since it varies across industries. This standard is generally a combination of employee size and annual average receipts.

Second, the SBA wants you, as the small business owner, to have a stake too. So, they require that you invest your own time and money into your small business. Also, eligibility rules state that you need to have been in business for a sufficient amount of time, typically a few years.

Finally, your business must be eligible for a loan. Some are not including real estate investment firms, rare coin dealers, companies involved in speculative activities, and companies where gambling is the primary activity, among others.

What are the SBA 7(a) loan program requirements?

Your job isn’t over yet, even once your business is eligible for a loan application. You need to meet the loan requirements, too. The SBA requires you to submit information on your “personal background and character”. This includes criminal history (if any), your citizenship status, work history in the form of a resume, past addresses, and other items as well.

You also need to provide a business plan. A solidified business plan goes a long way towards showcasing the strength of your business and your plans for the future. Don’t forget to include detailed information on how you’ll use your loan.

Other documents required are your business financial statements. You need to show your revenue and profitability. The SBA typically approves businesses with at least $100,000 in revenue each year. You should also provide a listing of any debts and your debt schedule, which can help highlight your expected cash flow.

Your personal credit score is important. The SBA and lenders will typically look for a FICO credit score above 650.

Finally, there is some personal risk involved with 7(a) loans too. The SBA requires anyone who owns over 20 percent of the business signs a personal guarantee on the loan.

While each lender is different and requirements vary depending on your situation, keep these requirements in mind as you move through the process.

Types of loans in the 7(a) program

Within the 7(a) loan program, there are different loan options beyond the 7(a) standard loan you can explore.

The 7(a) Small Loan program has all the requirements of the standard 7(a) loan with one significant difference: it offers a maximum loan amount of $350,000.

SBA Express loans are designed with quick turnarounds in mind. They have a maximum loan limit of $350,000. Note that the SBA guarantees 50 percent of the loan amount.

SBA Export Express loans are directed at exporters for lines of credit up to $500,000. The SBA guarantees 90 percent for loans up to $350,000 and 75 percent for amounts beyond that. It’s yet another option with quick turnaround times.

An Export Working Capital loan is for a revolving line of credit up to $5 million with a 90 percent SBA guarantee. This loan often has short terms of up to 12 months.

International Trade loans are set to meet the long-term financing needs of export businesses. The maximum amount is for $5 million, with the SBA guaranteeing 90 percent of the loan.

How can you use a 7(a) loan?

The SBA sets guidelines for both the general loan terms and how funds get used.

These include:

  • Expansion and or renovation needs
  • New construction
  • Purchasing land or buildings
  • Purchasing equipment, fixtures, or lease-hold improvements
  • Working capital
  • Refinancing debt (the SBA cites it must be for “compelling reasons”)
  • Seasonal lines of credit
  • Inventory costs
  • Business startup costs

Understandably so, it’s essential to know this information before you apply. Otherwise, you could lose your funding if you’re using it for unapproved reasons.

The Bottom Line

It’s easy to see why SBA 7(a) loans are so popular with small business owners. They provide funding with flexibility and attractive terms. If you meet the qualifications and requirements for an SBA loan, it just could be what you and your small business need to achieve your long-term goals. To learn more about SBA loans, click here.

Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail
https://kapitus.com/wp-content/uploads/2019/12/womaninbankersofficesign_758536-1.jpg 667 1000 Liz Froment https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Liz Froment2021-12-11 12:02:352023-08-31 12:15:04Can I Get Approved for the SBA 7(a) Loan Program

LATEST FROM KAPITUS

  • Small Business Loan Application Checklist
  • Getting a Business Loan with Bad Credit
  • Traditional Bank vs. Alternative Lender
  • Understanding Business Loan Requirements
  • Types of Small Business Loans and How to Choose One

Subscribe To Our Blog For More Tips On How To Grow Your Business

Categories

  • Automotive
  • Being a Business Owner
  • Budgeting
  • Business Ownership
  • Business Stories
  • Cash Flow
  • Commercial Cleaning
  • Construction
  • Credit
  • Dentists
  • Featured Stories
  • Financing
  • Industry Challenges
  • Information Technology
  • Inventory Management
  • Manage Your Money
  • Marketing Your Business
  • Medical Practices
  • Offline Marketing
  • Operating Your Business
  • Performance
  • Plumbers
  • Pricing
  • Process
  • Restaurants
  • Strategy
  • Taxes
  • Trucking
  • Uncategorized
  • Vendor Management

About Us

  • Media Center
  • Team
  • Careers
  • Events
  • Success Stories
  • The Kapitus Difference
  • Developer Documentation
  • Blog
  • Privacy Policy
  • Terms of Use

Products

  • Revenue Based Financing
  • Helix® Healthcare Financing
  • Business Loans
  • SBA Loans
  • Line of Credit
  • Invoice Factoring
  • Equipment Financing
  • Purchase Order Financing
  • Concierge Services

Contact Us

  • (800) 780-7133
  • Email Us

Signup For Our Newsletter

Copyright 2023 Strategic Funding Source, Inc. All rights reserved. Kapitus and the Kapitus logo are registered trademarks of Strategic Funding Source, Inc.
  • Twitter
  • LinkedIn
  • Facebook
  • Instagram
  • Youtube
Scroll to top

This site uses cookies to store information on your computer. Some are essential to make our site work properly; others help us improve the user experience. We encourage you to read Kapitus’s Privacy Policy to learn more about how we use cookies and how we may collect and use visitor data. By continuing to use this site, you consent to the placement of these cookies

OK

Cookie and Privacy Settings



Privacy Policy

This site uses cookies to store information on your computer. Some are essential to make our site work properly; others help us improve the user experience. We encourage you to read Kapitus’s Privacy Policy to learn more about how we use cookies and how we may collect and use visitor data. By continuing to use this site, you consent to the placement of these cookies

"*" indicates required fields

Step 1 of 10 - TELL US ABOUT YOUR PRIMARY FINANCING NEED

10%

Find the right financing product for you.

Answer a few questions and we’ll match you with the best product based on your needs and current situations.

I need financing to:*

How We Make Getting Business Financing Easier for You

If you are looking to determine the best financing option for you, our matching tool streamlines the process and arms you with information that you can use before you apply. To match you with your best options, we ask you to answer a series of basic questions about your existing and future needs, current financial health, and your financing preferences – including amount to be financed, ideal terms and financing urgency. Our system then finds you up to four financing options to fit your needs. Once you’re matched, you can expect to be contacted by one of our financing specialists to help you navigate the application and selection processes.

How It Works

  1. Answer a few questions. You let us know some basic information about your financing needs, so we can find a match.
  2. See your financing matches. You'll get matched with up to four financing options based on your answers.
  3. Apply for financing. You can apply for all of your financing options by completing one simple application and providing a few documents.
  4. Get an Advisor: You have the option to be assigned a financing specialist to help guide you through the application process.

Find your financing match

Why do we need this information?

Each financing product has its own minimum and maximum requirements around the amount of money that can be acquired through that option.

Find your financing match

My Industry is:*

Why do we need this information?

There are financing options created to meet the specific needs of particular industries.

Examples that fall within this industry include

  • Business Accountants
  • Marketing & PR Agencies
  • Commercial Cleaning Companies
  • Printers
  • Human Resource & Payroll Firms
  • Office Supplies Organizations
  • Salons/Spas
  • Gyms & Other Workout Studios
  • Pet Services Companies
  • Personal Accountants
  • Home Cleaning Companies
  • Residential Landscaping

Find your financing match

I have not yet started my business

Thank you for reaching out to Kapitus. Unfortunately, our financing products are only available for existing businesses and we will not be able to help you at this time.

Why do we need this information?

The amount of time your business has been in operation is a deciding factor in the type of financing options available to you.

Find your financing match

Why do we need this information?

Each financing product has its own minimum requirement for the amount of revenue being brought into a business on either a monthly or an annual basis. In addition, your monthly and/or annual revenue can dictate the length and term on your financing option.

Find your financing match

I would like to pay off my financing in:*

Why do we need this information?

Each financing product offers different payback lengths and terms.

Find your financing match

I need financing for my business:*

Why do we need this information?

Each financing product has different paperwork and underwriting processes. As a result, the amount of time it takes to get approved for one type of financing over another can vary significantly.

Find your financing match

Do you have an existing loan?*

Find your financing match

My personal credit score is:*

Why do we need this information?

There are financing options for every credit type, however your personal credit score will determine your eligibility for each financing type

We’re finding your match

"*" indicates required fields

Step 1 of 4 - Tell us about you

25%

Sign up for the Kapitus Partner Program!

Sign up for the Kapitus Partner Program!

Sign up for the Kapitus Partner Program!

I would like to join the Kapitus Program as a:*

Sign up for the Kapitus Partner Program!

"*" indicates required fields

Whether you want to learn more about our financing options, are interested in becoming a partner or just have a general question, we’re here to help! Simply fill out the form below and we’ll get it directly into the inbox of the right person.
This field is for validation purposes and should be left unchanged.