Overview of SBA 7(a) Loans
SBA 7(a) loans are the lowest-rate, longest-term loans available to most small businesses. These loans have favorable terms because they are partially guaranteed by the U.S. Small Business Administration (SBA). SBA 7(a) loans can be used for working capital, starting a new business, buying an existing business, or other business purposes.
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How SBA 7(a) Loans Work
SBA 7(a) loans are an inexpensive financing option for small business owners. Since these loans are backed by the U.S. Small Business Administration, they have some of the lowest interest rates and longest repayment terms that a small business can qualify for.
You can borrow anywhere between $5K to $5 million with an SBA 7(a) loan. Typically, SBA loans require a lot of paperwork and have a lengthy application process, but we can get you an SBA loan in 1-2 weeks. Find out how!
The SBA sets maximum interest rates on 7(a) loans. They are currently between 6-9 %. This is the cheapest form of business financing for most small businesses. The best SBA lenders can get you funded in under 30 days.
The low interest rates, combined with the fact that SBA 7(a) loans typically have 7-10 year terms, means that you’ll enjoy low monthly payments. There are fees on SBA loans, including the SBA guarantee fee, packaging fees, and closing costs. These fees can either be paid up front or rolled into the loan. Even taking these fees into account, SBA loans represent a bargain for most borrowers.
Beyond low interest rates and monthly payments, there are other advantages to getting an SBA 7(a) loan. For example, most SBA loans don’t have to be fully collateralized. You also may not have to put any money down. Finally, most SBA loans don’t have prepayment penalties, which gives you the flexibility of paying the loan off early.
SBA loans are available for startups in limited circumstances, such as when the owner has years of management or industry experience and a sizable down payment. In most cases, however, SBA 7(a) loans are best suited for established, profitable businesses that are over 2 years old.
There is more than one kind of SBA loan. SBA 7(a) loans are general purpose working capital loans. SBA 504/CDC loans are used to purchase real estate and equipment. If you are unsure which type of loan to apply for, we can help you evaluate which is better for your business goals.
Will I Qualify for an SBA 7(a) Loan?
The minimum requirements to qualify for an SBA 7(a) loan are: a personal credit score above 680, and you should be running a profitable business for at least 2 years. Check your credit score here for free!
Startups or those looking to buy a business may also qualify for an SBA loan, but only if the owner has strong credit, business management experience or relevant industry experience, and a down payment of at least 20 percent.
Regardless of what stage your business is in, you must have a good business plan when applying for an SBA loan. Click here to learn how you can write a great business plan in just a few hours.
Cost of SBA 7(a) Loans
The typical interest of an SBA 7(a) loan is between 6 % and 9 %. There are also guarantee fee, referral and packaging fee, and closing costs which are deducted from your loan proceeds at the time of funding.
The SBA sets maximum interest rates. Subject to that maximum, your rate will depend on your personal credit score, your business credit score, your time in business, and the profitability of your business.
7(a) Loan Details:
Maximum Loan Amount
Typical Loan Term
Typically 10 Years
Typical Interest Rates
As fast as 1 week
Typically not required.
Yes, but the loan doesn’t have to be fully collateralized.
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One of the cheapest forms of business financing
Long loan terms and low monthly payments
Down payment or collateral may not required
No prepayment penalty in most cases
Suitable for wide of variety of business purposes
Can take longer to get funding than other types of loans
Requires a lot of paperwork
Hard to qualify
How to Apply
Answer Simple Questions
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