What is an SBA 7(a) loan?
The 7(a) Loan Program is the Small Business Association’s primary program for helping small businesses with financing. Partially guaranteed by the federal government, the beauty of an SBA 7(a) loan is that it requires little or no down payment, making it perfect for small business.
Loan sizes range from $50,000 to $5 million and depending on the use of the proceeds, terms can be set for 7, 10, 15, 20, or 25 years. All loans are fully amortizing with no balloon payments. Interest rates can be floating (monthly or quarterly), adjustable (3, 5, or 10 years) or fixed for the life of the loan. The interest rate your business gets will be determined by the lender, based primarily on the level of risk associated with the loan request. Given their higher risk factor, start-ups are typically tagged with a higher interest rate than established businesses.
What can SBA 7(a) finance?
A variety of general business purposes such as:
- Business acquisitions
- Commercial real estate purchase or new construction
- Equipment and furniture purchase
- Leasehold improvements
- Refinance existing debt
- Working capital for operations
- Loans with a shortfall in collateral
- Business start-up costs
Closing costs (Appraisal, Environmental, etc.)
Are you eligible for an SBA 7(a) loan?
To be eligible the small business must meet the following requirements:
- The business must be a for-profit, non-publicly traded company.
- Ownership must be comprised of 51% U.S. citizens or registered aliens with green card.
- The business must do business in the United States or its possessions.
- The business must be a sole proprietorship, partnership, limited liability company, or corporation.
- The business must occupy at least 51% of the space if real estate is purchased.
- The business’ tangible net worth cannot exceed $15 million.
- The business’ average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application cannot exceed $5 million.
- Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
- Loans cannot be made to businesses involved in cannabis sales or production.
Not all borrowers and use of loan proceeds meet the SBA eligibility requirements, but if your business satisfies the above requirements, contact us to discuss your specific project.
Get Started Today!
Follow our step-by-step process detailing how the loan process works and see if you are eligible.
Benefits of a 7(a) Loan
- Lower down payment – in some cases 100% financing with nothing down
- Collateral shortfall is acceptable if all available collateral is taken
- Longer terms than conventional financing – up to 25 years
- Good for business acquisitions as goodwill can be financed
- Can finance the closing costs and fees
- Interest rates are flexible both floating and fixed
Industry Examples
Some examples of types of businesses that can be financed:
- Assisted living facilities
- Auto repair shops
- Car washes
- CPA firms
- Day cares
- Dentists
- Doctors
- Fitness centers
- Franchises
- Hotels
- Insurance agencies
- Movie theaters
- Restaurants
- Retail stores
What Lender Service Provider (LSP) Services are available?
MCDC is an approved SBA 7(a) Service Provider with over 20 years of experience in originating and servicing SBA loans. MCDC works with more than 20 lenders across Michigan to help assist the small business owner in finding the financing needed to grow their business. MCDC services General Program (GP), Preferred Lender Program (PLP), SBA Express and Community Advantage lenders to provide the availability needed to assist the borrower. Contact us at (833) GET7ALOANS or (833) 438-7256 with any questions or to get your SBA loan application started.