SBA 7(a) Loan Details

July 27, 2005

Small Business Administration 7(a) loans offer an SBA guaranty of up to 75 percent for loans up to $2 million. SBA loans can be used for the following:

Expand or renovate facilities;
Collateral or unique collateral;
Business acquisition;
Purchase machinery, equipment, fixtures and leasehold improvements;
Finance receivables and augment working capital;
Refinance existing debt (under some circumstances);
Provide seasonal lines of credit;
Construct commercial buildings; and/or
Purchase land or buildings.

How it Works
A U.S. Small Business Administration guaranty enables lenders to make loans they might not otherwise make on their own. Once a small business borrower completes a private lender’s application and meets the lender’s requirements, the lender may request an SBA guaranty. The guaranty request is a quick two-step process:

The borrower completes the SBA application, and
The lender submits a complete application to the SBA.

Interest Rates
Interest rates may be negotiated between the borrower and lender, may be fixed or variable, are tied to the prime rate, and may not exceed the following SBA maximums:

2.25 percent over prime for loans of less than seven years;
2.75 percent over prime for loans of seven years or longer;
Loans under $50,000 may be subject to higher rates.

Collateral
To secure the loan, the borrower must pledge available assets; loans are not declined when inadequate collateral is the only unfavorable factor. Personal guaranties of the principals are required for principals owning 20 percent or more of the business.

Maturity
The length of time for repayment depends on:

Ability to repay;
Use of the loan proceeds; and
The useful life of the assets being financed:
Working-capital loans generally have five to seven years to maturity.
Fixed-asset loans can have up to 25 years to maturity.

Eligibility
A business loan is generally eligible for SBA approval if:

The purpose of the loan is to start or grow a business;
The existing business has average annual sales for the preceding three years not exceeding $5 million, and the business, including affiliates, employs no more than 100 people;
The business and its owners have good credit; and
The business owners are of good character.

For more information on SBA loan opportunities, contact CBL at (866) 570-1237.

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