SBA 7(a) Loans: Your Complete Guide To Terms, Fees, & Eligibility

The Standard 7(a) SBA loan is the most common and straightforward of the available 7(a) options. Approval timelines vary, with funding typically taking 30 to 90 days.

Borrowers may receive as much as $5 million with the 7(a) Standard Loan. The SBA guarantees 85% of every loan up to $150,000. Beyond that amount, the SBA guarantees 75%. For smaller loan amounts, collateral may not be required.

The 7(a) Small Loan is similar to the Standard Loan but has lower borrowing limits. This is an option for borrowers who want low interest rates and long repayment terms but don’t need as much capital available through the 7(a) Standard Loan.

SBA 7(a) Small Loans are available in amounts up to $350,000. Funding typically takes 30 to 90 days.

The SBA guarantees up to 85% of each loan up to $150,000. Beyond that, the SBA’s guarantee falls to 75%. Smaller loans of $25,000 or less may not require collateral.

If you want fast loan approval, consider applying for the SBA 7(a) Express Loan. When you apply for the Express Loan, the SBA typically responds to applications within 36 hours.

The 7(a) Express Loan is available in amounts up to $500,000. The SBA guarantees up to 50% of Express loans, compared to up to 85% for standard 7(a) loans. Collateral is not required for loans up to $50,000.

7(a) CAPLines are lines of credit for short-term or cyclical capital needs. There are four CAPLines programs:

• Seasonal: Revolving or non-revolving line used to finance seasonal increases in accounts receivable, inventory, or labor costs
• Contract: Revolving or non-revolving line used to finance labor and material costs for assignable contracts
• Builder: Revolving or non-revolving line used by general contractors and builders for construction and renovation projects
• Working: Asset-based non-revolving line of credit for businesses that are unable to qualify for long-term credit

Maximum repayment terms for these lines of credit are ten years, although Builder CAPLines are capped at five years.

Borrowers may qualify for up to $5 million through this program. Turnaround times vary, although you can generally expect to receive approval within 21 days of applying for a line of credit.

SBA Export Working Capital Loans provide working capital to support export sales.

Exporters may receive as much as $5 million through this program. Approval can take days to weeks, and funding typically takes 30 to 90 days. The SBA guarantees up to 90% of funds.

These loans require export-related inventory or receivables as collateral. A personal guarantee for each person who has at least a 20% stake in the business is also required.

SBA Export Express Loans are for exporters. While these loans have lower borrowing limits than the SBA Working Capital Loan, it offers faster approvals. For these loans, the SBA will respond to the application within 24 hours.

Up to $500,000 can be borrowed through this loan program. The maximum SBA guarantee is 90% for loans up to $350,000 and 75% for loans that exceed $350,000. Collateral may be required.

SBA International Trade Loans are designed for growing export businesses with long-term financing needs. These loans support businesses facing foreign competition.  Funds can be used for fixed assets, construction, real estate equipment, and working capital for exports.

Borrowers may receive as much as $5 million, and repayment terms are up to 25 years for real estate and up to 10 years for all other purposes.

Approval timelines vary, but funding typically takes 30 to 90 days. These loans follow SBA guidelines and may involve additional SBA review compared to standard 7(a) loans.

SBA’s Preferred Lender program allows SBA lenders more autonomy to process and close loans. In other words, lenders can make approval decisions without waiting on the SBA.

While this isn’t a specific loan, borrowing from an SBA Preferred Lender could result in approval for SBA 7(a) loans in as little as 24 hours.

Interest rates for 7(a) loans vary based on the loan maturity and borrowed amount, but rates are usually much lower than their traditional commercial counterparts.

Repayment terms vary based on factors such as the type of 7(a) loan you receive and how funds will be spent. However, SBA 7(a) loan repayment terms may be up to 25 years, and you won’t find many other small business loans with such lengthy and favorable terms.

Down payment requirements differ, but borrowers could pay as little as a 10% down payment for SBA 7(a) loans. Smaller SBA 7(a) loans also may not require collateral, which can’t be said for many other business loans.

SBA 7(a) loans have few restrictions on how funds are used. In addition to loans, the SBA 7(a) program also offers lines of credit that provide a more flexible form of funding for businesses that need working capital.

The SBA limits the types and amounts of fees lenders can charge, including restrictions on certain origination and service fees.

You must meet the SBA size guidelines to qualify for a loan. These guidelines vary depending on what type of business you own, but your business must qualify as “small.” There is no 7(a) funding available for mid-sized businesses that do not meet the size guidelines.

The application process can be long and detailed, and generally requires extensive documentation.

Though the SBA may approve your application in as little as five days, funding can take 30 to 90 days.

7(a) loans require personal guarantees from owners who have an interest of 20% or more in the business entity. A personal guarantee means that personal assets can be seized in the event of loan default.

To qualify for an SBA 7(a) loan, your company must be for-profit and engage in business or plan to engage in business in the United States or U.S. territories.

Your business must also be in an industry that isn’t disqualified by the SBA. Industries ineligible to receive SBA loans include businesses that engage in:

• Illegal activities
• Gambling
• Investing
• Lending
• Multi-level sales
• Loan packaging
• Speculation

Businesses that are owned by parolees are also ineligible.

Most lenders require a business plan to show that you have specific financial goals and are a reliable borrower. For this same reason, you will need to provide an exact plan of how you intend to use potential funds, as well as financial projections.

The lender and the SBA use your credit score and history to evaluate the risk of lending. In general, borrowers should have a credit score of at least the mid-600s to qualify for an SBA 7(a) loan. A score of 680 or higher further boosts your chance of receiving a loan.

Before you apply, know where you stand by getting your free credit score. If your score isn’t where it needs to be to receive a loan, it’s time to start taking steps to improve your credit score for funding opportunities in the future.

Some SBA 7(a) loans may require you to put up collateral such as property, inventory, or even your personal home or car.

Industry experience is also preferred by many lenders. Lenders often prefer borrowers with relevant industry experience. Often, lenders may request resumes and other documentation from owners who have at least a 20% stake in the business to prove industry experience.