Managing and operating a small-sized business can be quite a task, particularly when times are uncertain and when the organization experiences revenue loss. This is precisely where an SBA or Small Business Administration loan can come handy. An SBA 7(a) loan is helpful for businesses that intend to get back on track.
SBA 7(a) Loan-What You Need to Know?
The SBA 7(a) loan program is a highly popular loan program provided by small business administration loan providing companies. Every time a business owner applies for the SBA 7(a) loan, they get to collaborate with a lender as well as an sba guaranteed that offers participation by providing a guarantee as well as requiring additional documents for the application.
New 7(a) Loan – The Pay check Protection Program against Coronavirus
To assist employees and companies during the COVID-19 outbreak, the SBA introduced a new 7(a) loan program known as the Paycheck Protection Program. This program provides an incentive to small-sized businesses with fewer than 50 employees. This helps small businesses in keeping the workers on their payroll.
Organizations that have over 500 employees are also eligible, particularly if they belong to specific industries such as food & accommodations.
No amount of fee is applicable on the new loan, and a business does not require to provide any collateral or personal guarantee either.Apart from this, the SBA will fully refund your loan if you use 75 percent of it to retain or rehire employees quickly and maintain their salaries at the same level.
You can also use the loan to pay mortgage interests, utilities, and rent. You can apply through any lender who offers an SBA 7(a) loan, or consult your existing lender to see if they participate. Note that loans offered as part of the Paycheck Protection Program became available on April 3rd and will continue to be offered through June 30th, 2020.
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What is the Amount You Will Get in Your SBA 7(a) Loan?
The standard 7(a) loan offers a maximum amount of 5million dollars, along with a guarantee of 85 percent for SBA loans of up to $150,000 as well a 75percent for loans that are greater than $150,000. The SBA 7(a) loan terms for acquiring real estate is 25 years, whereas the same for working capital, inventory, or equipment is ten years. The SBA sets the maximum rate of interest limit; however, you and your lender can negotiate within this limit. The interest rates are based on the size, prime rate of the loan, and the loan maturity amount.
Eligibility Requirements
For a business to acquire an SBA 7(a) loan, the following criteria should be met:
- Your business must be defined as a small business organization by the SBA. This is based on your industry type.
- Your business must run for profit in the United States or its territorial regions.
- You must have adequate resources to invest in your business. You must show that you are acquiring the loan for a solid business purpose.
- You must not be delinquent. This means you should not have an existing debt obligation towards the United States government. For instance, a student loan.
- You must have utilized other types of financial resources before applying for this loan.
Most firms are eligible, barring real estate companies and other speculative organizations. This also includes stamps and coin dealers. Leading businesses, pyramid sales organizations, businesses dealing with gambling or illegal activities, and non-profit companies are excluded. In addition, faith-based organizations can acquire a Paycheck Protection Program loan.
You can utilize the SBA 7(a) loan to purchase buildings or land, machinery, equipment, or supplies. You can use it for short-term or long-term working capital, refinancing, or buying an existing company.
Aside from filling a complete borrower information form as well as the loan application, you will require other documents such as your financial statement and the financial details of your business as well to acquire an SBA loan.
Getting the SBA 7(a) Loan
The SBA never lends money to a small business organization. Businesses need to search for a lender that has been approved by the SBA. This lender will require you to fill an application form for the 7(a) loan. Alternatively, you shall work with this lender on all the documents needed by SBA.
How Long Will It Take for Acquiring 7(a) Loan?
The turnaround time for an SBA 7(a) loan is anywhere between 5-10 days, however, each case is different, and there can be a situation when several businesses may be applying for the loan. Below, are the details of an SBA Express loans that have a faster turnaround time:
SBA 7(a) Loan Types
Aside from the PPP loans as well as the standard 7(a) loan, which has already been described above, the other 7(a) business loans are offered for particular funding requirements. The 7(a) Small business loans are offered for a maximum amount of $350,000.
SBA Express loan hasa shorter turnaround time. Also, the SBA states that it responds to applications within thirty-six hours. The maximum amount offered as part of the loan is $350,000.
You can also check the Express Bridge Loan Pilot Program, created for supplementing the direct disaster loans program as well as provide fast funding to the small business organizations that may have applied for a disaster loan. It provides a quick and guaranteed loan of around $25,000 to small-sized businesses in areas where the President has declared a disaster.
Apart from this, the Export Express loan program helps exporters needing loans or credit lines of up to $500,000. The Export Working Capital loans support businesses requiring more working capital to boost their sales.
The International Trade loan is provided to companies looking to expand or those severely impacted by imports. These loans help businesses modernize to meet foreign competition. In addition, Veterans Advantage loans and CAP Lines are available. CAP Lines is a program designed for small businesses to meet their cyclical and short-term capital requirements.
