Why Use SBA 7(a) Loans?
SBA 7(a) Loans are long term, government backed, guaranteed lending for working capital, inventory, equipment, and real estate use for your business. A 7(a) loan, unlike a typical commercial bank loan, can get you up to 90% financing of your total project cost. This is the first and most important benefit -- by using a SBA 7(a) loan you can free up valuable capital for operational uses in your business. 7(a) loans offer a long term financing structure that are typically floating rates over the life of the loan.
SBA 7(a) Benefits For Borrowers
- Offers more flexibility for loans to be used for working capital, intangible assets, and inventory
- The term for a 7(a) can be determined by maximum term for the assets class comprising the largest use of proceeds, with no call provisions or balloons. Example: $500,000 to buy a building, $350,000 for equipment would qualify for a 25 year term.
- Only a 3-year prepayment penalty for loans 15 years or more and no prepayment penalty for loans less than 15 years
- Significantly lower injection of equity
- Increased available capital
SBA 504 Benefits For Lenders
- 1st Lien position with SBA guaranty for 75% of the loan
- Additional income opportunities in secondary market
- Minimal equity injection requirements helps lenders compete for more business
Eligible Use of Funds
- Working Capital
- Business Acquisition
- Real Estate
Interest Rate and Terms
- Floating Rate -- based on the WSJ Prime Rate
- Up to a 5-year term for real estate
- Up to a 10-year term for working capital, inventory, and equipment
- A minimum of 10% equity for working capital, inventory, and real estate
- For business acquisitions, if intangible assets are $250,000 or greater, the injection must be 25% to be processed through Preferred Lender procedures