For your small business to be eligible for an SBA 7a loan, you must:

• Operate for a profit. Nonprofits cannot apply.
• Qualify as a small business for your industry, as determined by the SBA.
• Operate in the United States or its territories.
• Have a reasonable amount of equity in the business. In other words, you already invested your own money in your business.
• Have tried to use allternative sources of financing, including your personal assets, before reaching out for help from the SBA 7a loan program.
• Demonstrate a need for the loan, as well as a reasonable business purpose for using the loan funds.
• Be current on the payments for any other government loans you have.
• Have never defaulted on any previous government backed debt (including student loans).

The way the SBA defines a small business depends on the industry. They look at either total employees or total annual revenue, depending on the industry. For example, a gift/souvenir store would qualify if it had less than $8 million in annual revenue. A dog food manufacturing plant would qualify if it had fewer than 1000 employees. You can see the standards here.

For SBA 7a loans that require a down payment, the requirement is typically 10 to 20 percent of the total funding need. Not all 7a loans require a down payment. In addition, expect the lender to pull your credit report. Your personal credit score should be at least 650.

There are both fixed-rate SBA 7a loans, where the monthly payment does not change, and variable-rate SBA 7a loans, where your interest rate and payment changes based on market trends. For variable-rate loans, your interest rate will fluctuate along with a benchmark rate that the lender selects.

Whether fixed or variable, the lender ultimately sets the interest rate on your loan. However, the SBA sets limits on how much they can charge. The maximum interest rate depends on the loan amount and the number of years to maturity. Larger loans and shorter terms get the lowest rates.  

On fixed SBA 7a loans, the maximum interest rates can range from 5.5% to 8.0%. On variable SBA 7a loans, the maximum interest rate can range from “Base rate + 2.25%” to “Base rate + 4.75%.”

Besides the interest rate, SBA 7a loans have fees. You need to pay a one-time guaranty fee to the SBA. That helps fund the program and pay for losses when small business owners default on their loans. The guaranty fee ranges from 0.25% to 3.75%, depending on the size of your loan. The SBA guaranty fee is oftentimes built into the loan amount and does not need to be paid out of pocket by the Borrower.

If you’d like to apply for an SBA 7a business loan, you first need to find a lender who is part of this program. Many banks offer SBA loans. You could try asking your existing bank to see if they participate. The SBA also offers a web service that could match you to a lender.

Once you select a lender, you will need to submit a formal SBA loan application showing that you have the financial resources to repay the loan. Wait for the lender to tell you what forms it wants. Expect to be asked for:

• SBA Forms 1919, 912 and 413. These provide your background information, your personal financial statements, and permission for the SBA to pull your records for a background/credit check.
• Your small business financial statements, to show you have the necessary cash flow to cover the loan payments.
• A list of any other businesses that you own and debt schedules to assess other outstanding debt payments.
• Your past loan application history.
• Your personal and small business tax returns from the past three years.
• A list of possible collateral to support the loan, like real estate.
• The resumes of all key principals/owners in your business.
• An overview of your business, its challenges and how you’ll use the loan funds. You may need to forecast how your cash flow will change after using the loan funds.

The lender could have their own additional requirements.

The amount of time to get a decision depends on the program. For the standard 7a loans, it takes the SBA five to 10 business days to process an application.

With competitive interest rates and a wide range of possible uses, SBA 7a loans can be a valuable financing tool. The 7a loan is the most popular Small Business Administration program. If your business needs to borrow and hasn’t been able to qualify for conventional bank loans, an SBA 7a loan could be worth considering.

With that in-mind, other SBA loan programs can be a better fit in certain situations. For a large, long-term business investment that will also lead to community development goals, like job creation or improving your green infrastructure, you may qualify for a lower loan interest rate through the SBA CDC 504 loan program. For a smaller amount of money (under $100,000), it may make more sense to use an SBA Microloan.

For more information, reach out to one of our loan experts to discuss the details of your situation.

Preferred lenders are those to whom the SBA gives more authority and control over handling 7a loans. These lenders have greater flexibility to process, close, service and liquidate SBA-guaranteed loans without reaching out to the government first. Preferred lenders have this authority because of their satisfactory performance with SBA loans in the past.

An SBA lender that does not have preferred status will process your application hand-in-hand with the SBA.

For more information on these programs or any other SBA loan, please reach out to one of our specialists. They can further explain how to qualify for SBA loans. Speak with an SBA loan expert ->