Programs

SBA 7(A) LOAN PROGRAM

The SBA 7(a) loan guarantee program helps lenders extend business loans to qualifying small businesses who cannot obtain funds on reasonable terms through other sources. Almost any legitimate business purpose may qualify for financing under this program. SBA guarantees loans from participating lenders based on the size of the loan:

* Maximum loan size is $2 million
* Maximum guaranty amount is $1 million
* Guaranty cannot exceed 75% for loan amounts over $150,000
* Guaranty cannot exceed 85% for loan amounts less than or equal to $150,000

Who is eligible for 7(a) assistance

* "For-profit" corporations, partnerships or proprietorships
* American businesses independently owned and operated, not dominant in their fields
* Sales volume or number of employees below NAICS Code size standard

What is eligible for 7(a) assistance

* Expanding or modernizing existing facilities
* Purchasing machinery, equipment, fixtures and leasehold improvements
* Acquiring or constructing commercial real estate for business use
* Acquiring an existing business or starting a new business
* Refinancing existing debt for compelling reasons of benefit to the business
* Supplementing business working capital

Rates & Terms

* Loan maturities vary, depending on the use of loan proceeds
o Working capital - 5 to 7 years
o Equipment financing - 7 to 15 years
o Real estate financing - 15 to 25 years
* Interest rates are determined by the lender and the borrower, subject to SBA maximums
o Prime + 2.75% maximum for loan amounts over $50,000
o Prime + 3.75% maximum for loan amounts under $50,000
o Prime + 4.75% maximum for loan amounts under $25,000
o Rate maximums are 0.5% lower for loans with terms of less than 7 years
* Loans are fully amortized and may be prepaid at any time without penalty (except for modest prepayment charges during the first three years of loans with terms of more than 15 years)

Fees

* SBA requires payment from participating lenders of a one-time guaranty fee based on the initial guaranteed portion of the loan. This fee is usually passed on to the borrower as an out of pocket expense, although it can be provided for as an eligible use of loan proceeds. Depending on the size of the SBA guaranty, this fee ranges from 2% to 3.5% of the guaranty.
* SBA requires participating lenders to pay an ongoing servicing fee based on the guaranteed portion of the outstanding loan balance. This 0.5% annualized fee is usually passed on to the borrower by including it in the interest rate.
* Other than these SBA fees, lenders are prohibited from charging other fees or points on SBA loans. The only exceptions are out of pocket costs incurred by the lender in direct connection with the loan, or a commitment fee which may be charged under the Export Working Capital Loan Program

Borrower Benefits

* Eases cash flow because of extended repayment terms
* Reasonable interest rates
* Loans may be prepaid, in whole or in part, at any time
* Provides access to funds that might not otherwise be available
* Provides entre to other SBA services, including S.C.O.R.E. counseling

What Does SBA Consider

* Historical earnings and repayment ability
* Projected earnings and repayment ability
* History and experience of the business and the owners
* Credit agency reports of the business and the owners
* Capitalization of the business (equity in relation to debt)
* Collateral available to secure the loan
* Special Note: SBA reviews all projects individually on their merits