SBA 7A Loan Program

The 7(a) loan program is the Small Business Administration’s primary loan program to provide funding for small businesses. However, not all 7(a) loans are the same; they offer different terms and conditions, including the guaranty percentage and loan amount.

However, all types of 7(a) loans provide loan guaranties to lenders, which allows them to provide financing for small businesses for purposes including:

  • The acquisition, refinancing, or improvement of real estate and buildings
  • Short- or long-term working capital
  • Restructuring current business debt
  • Purchasing or installing new machinery, equipment, furniture, fixtures, or supplies
  • Changes of ownership

Additionally, 7(a) loans can cover expenses that fall in multiple listed categories. Generally speaking, 7(a) loans can be secured for up to $5 million in financing. However, eligibility for a specific amount will depend on specific factors, such as length of time in business, credit history, industry, and location.

To qualify for 7(a) loan financing, a business must meet the following criteria:

  • Be an operating for-profit company.
  • Be located in the United States.
  • Meet the defined small business size regulations as outlined in 13 CFR Part 121.
  • Not be an ineligible business as defined in 13 CFR Part 120. Examples of ineligible businesses include non-profits, financial institutions, passive businesses owned by developers or landlords who do not use or occupy the assets, life insurance companies, foreign companies, and others.
  • Be unable to obtain financing on reasonable terms from non-federal, non-state, and non-local government sources.
  • Be creditworthy and able to demonstrate the ability to pay back the loan.

There are several types of 7(a) loans, including the following:

  • Standard 7(a): These loans are generally greater than $500,000 (and can go up to $5 million) and may be processed under the Preferred Lender Program delegated authority or non-delegated through the Loan Guaranty Processing Center (LGPC). The maximum SBA guarantee percentage with a standard 7(a) loan is 75%, and this loan type is considered fully secured.
  • 7(a) Small Loans: These loans are term or non-revolving loans that can be granted for up to $500,000. The maximum guarantee percentage is 85% for loans up to $150,000 and 75% for loans greater than $150,000. For loans less than $50,000, the SBA does not require collateral, except for International Trade Loans. For loans ranging from $50,001 to $500,000, the lender must follow written collateral policies and procedures that it has established for similarly-sized, non-SBA guaranteed commercial loans.
  • SBA Express: This loan type allows lenders to process, close, service, and liquidate the loan without SBA review. Express options have a maximum loan amount of $500,000 and a maximum SBA guarantee percentage of 50%.  
  • Export Express: Export Express 7(a) loans are similar to the SBA Express option but provide a higher guarantee to mitigate international credit risk. The maximum loan amount is $500,000. Loans that are $350,000 or less have a maximum SBA guarantee of 90%, while it is 75% for loans more than $350,000.
  • Export Working Capital: These loans can be granted for up to $5 million, with a maximum SBA guarantee percentage of 90%. These loans are for businesses that can generate export sales and need additional working capital to realize these sales opportunities.
  • International Trade: The 7(a) International Trade loan program guarantees loans to improve the competitive position of small businesses that are existing exporters or developing new export markets. The maximum loan amount is $5 million, with a maximum SBA guarantee of 90%.

SBA’s 7(a) loans are a popular option for many small businesses because they are flexible and easy to secure. To learn more about 7(a) loans or for assistance in determining the right 7(a) option for your business, contact Penn Commercial Capital today!

Apply Now