Think you need a lot of money to get a small business loan? Not so with an SBA 7(a) loan. In this post, we will outline what this SBA loan is, who qualifies for it and how to get one. Ready to learn more? Let’s start!
What is an SBA 7(a) loan?
The SBA 7(a) loan program is the most popular SBA loan provided by the Small Business Administration and offered by SBA lenders such as banks, credit unions, and online lenders. It is available to businesses of all sizes and can be used for a variety of purposes, including working capital and cash flow, inventory, equipment, and real estate.
Why you should consider an SBA loan 7(a) for your small business
As a business owner, you are always looking for ways to secure financing and use the loan proceeds to grow your business. Here are five reasons why you should consider this type of loan:You don’t need perfect credit to qualify. The SBA does not lend money directly to small businesses. Rather, it works with approved lenders, such as banks and credit unions, to provide financing and loan terms. This means that small business owners can still qualify for the loan even if they don’t have perfect credit. You can use the loan for several purposes. As we mentioned earlier, SBA 7(a) loans can be used for a variety of purposes, including working capital, inventory, equipment and commercial real estate. You may be eligible for a lower interest rate. The interest rates on loans from an SBA loan partner are typically lower than the interest rates on traditional bank loans. This is because the SBA guarantees part of the loan, reducing the risk for the lender. You may have a longer repayment term. SBA 7(a) loans typically have a repayment period of up to 25 years. This gives you more time to repay the loan and frees up cash flow in the meantime. You may be able to get a partially forgivable loan. If you use your business loan to buy equipment or real estate, you may be able to get a portion of the loan waived if you create jobs or meet other requirements. This can save you a significant amount in the long run.
SBA 7(a) Loan Requirements
To be approved for this type of loan, your small business must meet the following loan requirements:Minimum of two years of business. To qualify for an SBA 7(a) loan, your business must have been operational for at least two years. Minimum Credit Score Requirements. While you don’t need perfect credit to qualify for an SBA loan, you do need a personal credit score of at least 640. Business credit is not a requirement, but it can be helpful in the application process. Annual income. Your company must also have an annual turnover of at least $120,000. If you don’t meet this requirement, you may still qualify for other SBA small business financing. Debt-to-income ratio. In addition to the above requirements, you must also have a debt-to-income ratio of 50% or less, which means that your company’s debt cannot exceed 50% of your company’s total income.
Types of Small Business Administration 7(a) Loan
There are many SBA loan programs available, but the 7(a) loan program is the most popular. Here are a few different types of SBA 7(a) business loan programs:
Standard 7(a) loan
The standard 7(a) loan is the most common type of SBA loan. It is available to businesses of all sizes and can be used for a variety of purposes, including working capital, inventory, equipment, and real estate. You can apply for a loan up to $5 million.
7(a) Small loan
The 7(a) Small Loan is for businesses that need smaller loans, with a maximum loan amount of $350,000. It is a good option for companies that do not have much collateral as security for the loan.
An Express Loan is a 7(a) loan that is processed and approved faster than other types of SBA loans. You can typically get an Express Loan in less than 36 hours, making it a great option for businesses that need quick access to financing.
Export working capital
This type of 7(a) loan is specifically for businesses that export goods or services. If you export goods or services, you may qualify for a loan of up to $5 million.
The Veterans Advantage program is designed to give veterans and their spouses access to small business financing. If you are a veteran or the spouse of a veteran, you may qualify for a reduced interest rate on an SBA 7(a) loan.
How to Apply for SBA 7(a) Business Loans
Applying for this type of loan is a simple process. Let’s take a look at the steps required for the loan application process:Choose an SBA lender. You choose a bank or credit union that offers SBA-backed loans. Be sure to shop around and compare rates, terms and conditions before choosing a lender. Complete the request. Each SBA preferred lender has its own application that you must complete. Gather the required documents, such as your business tax returns, before getting started with your loan application. Submit your application. Once you have completed the application from one of the available SBA preferred lenders, submit it to your chosen lender for review. Get approved and get access to your money. If your loan is approved, you will receive the money in one go. You can then use the money for its intended purpose.
How hard is it to get an SBA 7(a) loan?
Getting an SBA 7(a) loan like loans to California lenders is not difficult if you meet the eligibility requirements and have a strong application. However, it is important to remember that this is a competitive program. There are more companies applying for SBA 7(a) loans than funds are available.
How much can you get from an SBA 7(a) loan?
The maximum loan amount for an SBA 7(a) loan is $5 million. The interest rate is variable, the repayment terms are flexible and the collateral requirements are relatively flexible. Overall, the SBA 7(a) loan program is a very attractive option for small businesses.
Are SBA Loans Forgivable?
SBA loans, such as SBA 7(a) loans, are not automatically waived, but there are programs that may be able to waive part or all of your loan. To be eligible for forgiveness, you must use the proceeds from the loan for eligible expenses, such as payroll, rent, and utilities. You must also meet certain other conditions, such as maintaining or restoring your workforce and wages.
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