7(a) loans (2024)

FAQs

Are SBA 7A loans hard to get? ›

For SBA Microloans, the minimum credit score is typically between 620-640. For SBA 7(a) loans, the minimum credit score is typically 640, but borrowers may find greater success if they can boost their credit score into the 680+ range.

The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. Your lender will help you figure out which type of loan is best suited for your needs.

SBA 7(a) loans are getting smaller: Since the end of the U.S. Small Business Administration's 2022 fiscal year, the average loan size in its flagship program has dropped more than six figures. The addition of three new nondepository lenders could further drive down this figure.

For most 7(a) loan programs, SBA guarantees up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. However, SBA provides a 50% guaranty on SBA Express loans. SBA provides a 90% guaranty for Export Express, Export Working Capital Program (EWCP), and International Trade loans.

The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.

Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.

SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.

The SBA generally doesn't offer 100 percent forgiveness on 7(a) and 504 loans, no matter how dire your finances are. However, for companies that have had to cease operations, the SBA will consider settlements that have been agreed to between a borrower and their loan issuer.

The maximum 7(a) repayment term is 25 years for real estate purchases. For equipment purchases, inventory loans and working capital, the maximum repayment term is 10 years. How much down payment do you need for an SBA 7(a) loan?

Do you need collateral for SBA 7a? ›

SBA Express lenders have delegated authority to process, close, service, and liquidate the 7(a) loan without SBA review. Lenders are not required to take collateral for loans up to $50,000.

Maximum loan amount: $5 million. Repayment terms: Generally up to 7 years for working capital, 10 years for equipment, and 25 years for real estate.

Terms range from 10 to 25 years and the length of your term will determine if you have a prepayment penalty. For SBA 7(a) loans with a term of less than 15 years, there's no prepayment penalty. For SBA 7(a) loan has a term of 15 years or more, you may have an SBA prepayment penalty.

The SBA 7(a) Loan program

SBA 7(a) loans are the most popular type of SBA loan. These loans are federally guaranteed term loans with a maximum loan amount of $5 million. Business owners often use SBA 7(a) loans to finance working capital needs, buy an existing business, refinance debt, or purchase new equipment.

Many statistics say that large banks approve SBA loans at rates as low as 20-30%, while smaller banks approve SBA loans at around 40% or less. All this to say: SBA loan approval rates hover at half or below all loan applications that are submitted.

On average, most SBA loans take 30 to 90 days from applying to funding. 7(a) loan subtypes are backed directly by the SBA. The SBA's turnaround time is 2 to 10 business days, but approval from your chosen lender can take 30 to 60 days. Microloans are loans for smaller amounts of $50,000 or less.

SBA 7a loans can be used to buy a business or obtain working capital. The maximum loan for an SBA 7a loan amount is $5 million. The interest rate on a 7a loan, however, can be adjustable and tied to the prime interest rate. Collateral is required, at 90 percent.