Finance · April 02, 2021

What You Need to Know About the SBA 7(a) Loan Program

If you're a small business owner looking for a loan, you've likely heard of the 7(a) business loans offered by the Small Business Administration, or SBA. These loans offer some attractive features for business owners seeking financing. Learn the basics of the SBA 7(a) loan program so you can decide whether this option makes sense for you.


What is the SBA 7(a) loan program?

The SBA uses the 7(a) loan program as its primary method for funding small businesses. Partially guaranteed by the SBA, these loans of up to $5 million include repayment terms of up to 25 years. They also offer competitive rates.

The 7(a) product provides credit solutions for start-ups, business purchases, partner buyouts, in addition to CRE purchases and business expansions. The mission of the SBA is to “maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses”. SBA loans are made through banks, credit unions and other lenders who partner with the SBA.

7(a) loan benefits

While banks are still held accountable for making prudent credit decisions, 7(a) loans provide the bank with a 50% to 85% guaranty which can mitigate a portion of the credit risk and lower bank capital reserve requirements. The guarantee means new possibilities for clients to access capital. SBA also offers longer terms and lower down payments which allow for lower monthly payments and more working cash to remaining in the business.

Finding the right 7(a) option

To qualify for a 7(a) loan, a company must be for-profit and do business in the United States or its territories. Also, owners must have reasonable equity and a strong personal credit score. There are several different types of 7(a) loans available, each with different terms that might make more or less sense for you, depending on your business's needs. First Citizens offers two 7(a) loan options:

  • 7(a) Standard loan: Term loan up to $5 million that can be used for CRE, construction, lease hold improvements, business acquisitions, partner buy-outs, equipment, inventory, furniture/ fixtures, working capital, closing costs and fees. These have terms from 10 to 25 years depending on use of funds.
  • 7(a) Small loan: Term loan up to $350,000 that can be used the same way as the standard 7(a) loan but have less underwriting and collateral requirements.

Is a 7(a) loan right for you?

If you have good personal credit and a growing small business, an SBA 7(a) loan could be just what you need. Talk to a trusted business banker to discuss your business's needs or visit sba.gov to learn more.

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