SBA 7(a) loans are issued by private lenders and backed by the SBA. Terms can vary by loan type and lender.
Randa KrissWriter | Small business, business banking, business loans
Randa Kriss is a small-business writer who joined NerdWallet in 2020. She previously worked as a writer at Fundera, covering a wide variety of small-business topics including banking and loan products. Her work has been featured by The Washington Post, The Associated Press and Nasdaq, among others. Randa earned a bachelor's degree in English and Spanish at Iona College.
Last updated on September 16, 2024 Sally LaucknerSally Lauckner has over a decade of experience in print and online journalism. Before joining NerdWallet, Sally was the editorial director at Fundera, where she built and led a team focused on small-business content. Her prior experience includes two years as a senior editor at SmartAsset, where she edited a wide range of personal finance content, and five years at the AOL Huffington Post Media Group, where she held a variety of editorial roles. She has a master's in journalism from New York University and a bachelor's in English and history from Columbia University. Email: slauckner@nerdwallet.com.
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An SBA 7(a) loan is a small-business loan issued by a private lender and partially backed by the U.S. Small Business Administration. SBA 7(a) loans are the most common type of SBA loan, and the SBA has guaranteed over 66,000 7(a) loans in fiscal year 2024 [0]
U.S. Small Business Administration . 7(a) & 504 Lender Report. Accessed Sep 16, 2024.Although SBA 7(a) loans can be hard to qualify for, they are an ideal option for business financing due to their long repayment terms and low interest rates. Plus, 7(a) loans can be used for a variety of purposes, including working capital, business expansions or purchasing equipment and supplies.
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
The SBA 7(a) loan program consists of several different loan types. The best one for your business will depend on the amount of funding you need, how you intend to use the funding and how quickly you need it.
SBA 7(a) loan type Maximum loan amount Maximum SBA guarantee Application turnaround time from SBA Standard 7(a) loan 85% for loans up to $150,000 and 75% for loans greater than $150,000. Five to 10 business days. Funding working capital, equipment and supplies purchases, and real estate and business expansion. 7(a) small loan 85% for loans up to $150,000 and 75% for loans greater than $150,000. Two to 10 business days. Funding smaller financing needs. Express loan Doesn't require SBA review. Expedited funding for smaller loan amounts. Export express loan 90% for loans of $350,000 or less and 75% for loans more than $350,000. Doesn't require SBA review. Expedited funding to enhance a business’s export development. Export working capital loan Doesn't require SBA review. Funding working capital to support export sales. International trade loan Five to 10 business days. Long-term funding to expand export sales or modernize to contend with foreign competitors. CAPLines of credit 85% for lines up to $150,000 and 75% for lines greater than $150,000. Five to 10 business days. Finance short-term and seasonal working capital needs.The 7(a) Working Capital Pilot Program is designed to offer a flexible and affordable way for small businesses to meet their working capital needs. These lines of credit are available up to $5 million with repayment terms up to 60 months.
Although you can get a working capital line of credit through the CAPLines program, this pilot program offers a more streamlined application process and a unique fee structure. The program also provides one-on-one counseling with SBA subject matter experts.
Advertisement — Randa Kriss, lead writer covering small businessAlthough the SBA restricts the fees lenders can charge, most SBA 7(a) loans will have a guarantee fee, which (at a maximum) ranges from 0.25% to 3.75% based on the size of the loan.
The SBA waives guarantee fees on Express loans for veteran-owned businesses.Depending on the lender, you may also face packaging and servicing fees — however, the SBA specifies that lenders cannot charge prepayment penalties, origination fees, renewal fees or similar extraneous fees. Lenders are allowed, however, to charge a flat fee of $2,500 per loan [0]
U.S. Small Business Administration . Lender and Development Company Loan Programs. Accessed Sep 16, 2024.
Regardless of the type of 7(a) loan, you'll have to meet a standard set of requirements laid out by the SBA, as well as any requirements from your lender in order to qualify for financing.
Typically, small businesses must meet the following criteria to qualify for an SBA 7(a) loan:Must be a for-profit business operating in the U.S. Certain types of businesses — such as real estate investment firms, religious organizations and gambling businesses — are not eligible.
Must be a small business, as defined by the SBA. Must be able to show your creditworthiness and ability to repay the loan. Must have sought out other forms of financing before turning to an SBA loan.Must be able to demonstrate the need for a loan and show the business purpose for which you’ll use the funds.
Cannot be delinquent on any existing government loans. Be able to provide collateral for loans larger than $50,000. Owners of 20% or more of the business must provide a personal guarantee.Additionally, although the SBA doesn’t designate numerical minimums for evaluating a borrower’s creditworthiness and ability to repay a loan, lenders will typically want to see the following:
A good personal credit score (690 and above). Solid annual revenue. At least two years in business.To apply for a 7(a) loan, you’ll work with an SBA lending partner, like a bank or credit union, to complete an application. The lender will submit your application package to the SBA in order to receive a loan guarantee; this way, if you default on the loan, the SBA will repay the lender the guaranteed amount.
If you think you might qualify for an SBA 7(a) loan, you can complete the application process by following these three steps:
Hundreds of financial institutions offer SBA 7(a) loans, including national banks like Chase, Wells Fargo and Bank of America. You might start by contacting a bank you have a relationship with to see if it offers SBA 7(a) loans.
The SBA also offers a lender match tool through its website that allows you to provide information about your business and get connected with a lender in your area.
In general, you’ll want to look for SBA lenders that have experience issuing 7(a) loans, as these institutions will be able to expedite the application process, answer questions you may have and possibly increase your chances for approval.
Your SBA lender will be able to help you gather your documents to prepare and submit a completed SBA 7(a) loan application. Although the requirements will vary based on the individual lender and the type of SBA 7(a) loan, here is some of the documentation you may need to provide:
SBA Form 1919, Borrower Information Form. Personal background and financial statement (SBA Forms 912 and 413).Business financial statements, such as balance sheets, profit and loss statements and projected financial statements.
Business certificate or license. Loan application history. Income tax returns. Resumes for each business owner. Business overview and history. Business lease.After you’ve submitted your SBA 7(a) loan application, you’ll need to wait for approval — whether from your lender directly or the SBA. SBA Express and Preferred Lenders may approve loans without the SBA reviewing the application, thereby expediting the timeline.
Once your loan is approved, your lender will start the closing process, which includes securing collateral, preparing loan documents and fulfilling any other authorization requirements.
Your lender will then disburse your funds, and you will repay the loan in monthly payments over the course of the term. The application and funding process usually takes between 60-90 days to get an SBA loan, though turnaround time varies.
If your business is new. Look into SBA microloans. Although you can only borrow up to $50,000, microloans have less stringent borrower requirements.
If your personal credit score isn’t excellent. Online lenders may offer more flexibility than SBA lenders.
If you’re in a rush. Consider an SBA Express loan or try working with an online lender that can fund loans quickly if you can’t meet the SBA’s requirements.
It can be difficult to get an SBA 7(a) loan if you don’t have strong annual revenue, a good credit score (690+) and at least two years in business. SBA 7(a) loan requirements vary from lender to lender, but you’ll generally need to meet these criteria to qualify.
Businesses that can’t qualify might look into online loans or SBA microloans as alternatives. How long are SBA 7(a) loans?Repayment terms for SBA 7(a) loans vary based on how you intend to use the funding. The maximum 7(a) repayment term is 25 years for real estate purchases. For equipment purchases, inventory loans and working capital, the maximum repayment term is 10 years.
How much down payment do you need for an SBA 7(a) loan?SBA 7(a) loans can require at least a 10% down payment when they're used to buy a business. For other use cases, requirements vary based on your lender's standard eligibility criteria.
About the author:Randa Kriss is a lead writer and NerdWallet authority on small business. She has nearly a decade of experience in digital content. Prior to joining NerdWallet in 2020, Randa worked as a writer at Fundera, covering a wide variety of small-business topics and specializing in the lending and banking spaces. Her work has been featured in The Washington Post, The Associated Press, MarketWatch and Nasdaq, among other publications. She has also hosted a webinar as part of the SBA's 2024 National Small Business Week Virtual Summit. Randa is passionate about helping small-business owners make educated financial decisions, especially when it comes to affordable funding. She is based in Chicago.
On a similar note.SBA Loan Requirements: How to Qualify for Financing
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A business line of credit gives you access to a set amount of capital that you can draw from as needed. You only pay interest on the funds you draw.
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