A Comprehensive Guide to SBA 7(a) Loan
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 that offers participation by providing a guarantee as well as requiring additional documents for the application.
New 7(a) Loan – The Paycheck Protection Program against Coronavirus
In order to assist employees and companies during the COVID-19 outbreak, a new SBA 7(a) loan program known as the Paycheck Protection Program has been introduced to provide an incentive to small-sized businesses that have less than 50 employees in their organization. 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, your loan will be fully refunded if you utilize 75percent of the same for retaining or rehiring employees quickly and when you retain their salary at the same level.
Businesses can also utilize the loan for paying mortgage interests, utilities, and rent. You have the option of applying through any lender who offers an SBA 7(a) loan, or you can even consult your existing lender to check if they also participate. It must be noted that the loans offered as part of the Paycheck Protection Program were made available from 3rd of April and will continue to be offered right through 30th of June, 2020.
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. Also, the maximum rate of interest limit is set by the SBA; however, you and your lender can quickly negotiate with the same limit. The rates of interest are decided on the basis of the size, prime rate of a loan, as well as the loan maturity amount.
For a business to acquire an SBA 7(a) loan, the following criteria should be met:
- Your business should be defined as the small business organization by an SBA (based on the type of your industry) to become eligible for SBA 7(a) loan.
- Apart from this, your business should be running for profit in the United States or its territorial region.
- You should have adequate resources for investing your assets within the business, as well as you should show that a loan is being acquired for a solid business purpose.
- You shouldn’t be a delinquent i.e., have an existing debt obligation towards the United States government (for instance, a student loan).
- You should have utilized other types of financial resources even before you apply for this particular loan.
Most of the firms are eligible, barring the real estate companies as well as other speculative organizations, stamps and rain coin dealers, leading businesses, pyramid sales organizations, businesses that deal with gambling or illegal activities as well as non-profit companies. In addition to this, faith-based organizations can also acquire a Paycheck Protection Program loan.
The SBA 7(a) loan can be utilized for purchasing buildings or lands, machinery, equipment, or/and supplies for short-term or long-term working capital, the purpose of refinancing, or even for 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 has a 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 a disaster has been declared by the President.
Apart from this, there is an Export Express loan program designed for exporters in need for loans as well as credit lines of as much as $500,000. On the other hand, the Export Working Capital loans are offered to businesses that require more working capital for supporting their sales.
The International Trade loan is provided to companies which are looking to expand or even to those that have been severely impacted by the imports as well as plan to modernize with the aim of meeting foreign competition. In addition to the above, there are Veterans Advantage loans as well as CAPLines, which is a program designed for small business organizations looking to meet their cyclical and short-term capital requirements.