Here’s an in-depth look at standard 7a loans
Standard 7a Loans
Standard 7a loans are the main type of 7a small business loan. Industry restrictions do not apply to standard 7a loans - anyone can apply for SBA loans for small business owners. On the other hand, only exporters can apply for the Export Express or Export Working Capital loans. Provided your business meets the SBA’s definition of small and you are for profit, you can apply.
One of the main benefits of 7a loans is that the SBA will guarantee part of your loan. The guarantee can help a small business owner qualify for financing on better terms than might be offered outside the government program. Under the Standard 7a Loan program, the SBA guarantees up to 85% of loans up to $150,000 and up to 75% of larger loans.
The SBA charges a guaranty fee on some loans. The fee depends on how much you borrow, the loan term, and how much of the loan the government guarantees. Some guaranty fees are waived until Fall 2022 as part of the government’s COVID-19 relief. Your lender can tell you whether you’ll pay a guaranty fee.
You will also owe interest on the loan. Maximum SBA loan rates are set by the government. Below that limit, the lender will set your interest rate based on your SBA loan application. SBA 7a loans are for business owners who can’t get a conventional loan at comparable terms.
Applying for Standard 7a Loans
To apply, you will need to submit SBA Forms 1919. Form 1919 lists information about you as the borrower for 7a programs, including your contact information, the names of the owners of your business, and whether you’ve applied for SBA loans in the past. The lender will complete another form, Form 1920, on your behalf, based on your application. That form lists the type of loan you want to apply for, the amount, and other details such as whether the interest rate is fixed or variable.
The SBA loan program requirements and application process depend on the lender. Some of the documents you may need to provide include:
- Your business financial statements
- Personal and business tax returns from each business owner
- An overview of your business, including why you need the loan
You do not need to provide collateral for SBA 7a loans below $25,000. SBA 7a loans above $350,000 must be fully secured. If your business assets aren’t enough, you may need to put up personal assets like your home or other real estate to back up the loan. Collateral requirements apply to most SBA loans but not all. The SBA waives the collateral requirement for certain borrowers in the Economic Injury Disaster Loan (EIDL) program.
How long do SBA loans take?
The SBA takes roughly five to 10 days to give a decision on a 7a loan application. If you want financing sooner and are borrowing a smaller amount, you could consider an SBA Express Loan.
Standard 7a loans can go up to $5 million. Technically, there is no minimum SBA 7a loan amount. However, if you apply for less than $350,000, the lender will first see whether you qualify for a 7a Small Loan.