7(a) Loan Programs Guaranteed by the Small Business Administration
Frequently Asked Questions
Q: What is a “7(a)” loan?
A: The 7(a) loans is the most popular, most basic of the Small Business Administration’s (SBA) guaranteed lending programs.
Q: Why should I consider a 7(a) loan for my project?
A: A 7(a) guarantee from the SBA makes lenders more willing to lend money to small businesses with weaknesses in their loan applications such as a lack of cash flow history.
Q: What is the maximum size of a 7(a) loan?
A: Up to $5 million.
Q: What is the payback term on a 7(a) loan?
A: Up to 25 years on real estate, up to 10 years on equipment and working capital.
Q: What kind of interest rates are charged on 7(a) loans?
A: The rate on your 7(a) loan will be based upon the current Prime Rate, the size of your loan, and the maturity date.
Q: Are there qualifications for my business to be eligible for a 7(a) loan?
A: Yes, there are certain qualifications that must be met in order to be eligible for a 7(a) loan?
- You must be certified by the SBA as a small business.
- You must have personal assets you’re investing in the business.
- You must show that the loan is for a sound business purpose.
- You must have never defaulted on any debt to the U.S. government.
Q: Are there types of businesses that don’t qualify for 7(a) loans?
A: Yes, there are businesses that do not qualify for 7(a) loans:
- You cannot use these loans for speculative real estate loans.
- You cannot be a lending company.
- Non-profit businesses do not qualify.
Q: Are there specific ways that 7(a) loan funds must be used?
A: Yes, SBA loans must be used for approved purposes such as:
- Purchase of land or buildings.
- The purchase of equipment, machinery, or supplies.
- Long or short-term working capital.
- To re-finance or purchase an existing business.