What is the SBA 7 Loan Program (a) and how can it help your business?

Loan 7 (a) is the most popular financing program of the SBA. It provides working capital to small businesses that need working capital of up to $ 5 million. It is also a secured loan program. So, basically, small businesses work with traditional lenders, but the money is guaranteed by the SBA in order to support the growth of small businesses. Here are some details about the program so you can determine if it suits you.

What is it?

Essentially, it's a secured loan program designed to help more small businesses get access to financing.

Robert Harrow, Head of Credit and Credit at ValuePenguin, explained in a phone interview with Small Business Trends: "A good way to look at it is that Loans 7 (a) are for small businesses who "from a bank. They are not an immediate no. They meet all the minimum requirements. But this program helps fill the void left by the banks that are still on the fence of some candidates to promote them and help them get financing. "

Who is eligible?

In order to qualify for loan program 7 (a), you must meet the size standards of the SBA, which vary by industry. You must also operate a for-profit business. This is not restricted by the industry, but you must try to use other types of financial resources, such as having staff, before applying for a loan.

What can you use 7 (a) for money?

You must also have a specific goal in mind for the funds you request. This may include money to finance start-up costs, purchase equipment, buy land, repair existing capital, finance growth opportunities, refinance debts or buy supplies.

How much can you get under a 7 (a)?

Qualified small businesses can borrow up to $ 5 million. There is no minimum amount.

How much time do I need to repay a loan 7 (a)?

The term of the loan will depend on your agreement with an SBA approved lender. However, the terms are normally between five and ten years.

What is the interest rate?

Again, the exact number will depend on the lender you work with, the amount you want to borrow and what you are entitled to. However, the SBA caps the interest rate just below 10 percent. And according to Harrow, many rates are between 6 and 8%.

Where can I apply?

You do not ask for a loan 7 (a) directly with the SBA. Instead, you work with an SBA approved lender. This is like asking for a loan from your usual bank or any other financial institution.

How can I find a SBA 7 (a) lender?

You can check with your existing bank whether it is working with SBA loans or consult the list of the most active 7 (a) lenders online.

Harrow says, "I know that many small businesses tend to find success by working with their existing bank or financial institution because they already know your finances and you already have established a relationship. This can therefore make the process much easier. "

How long until I get an approval?

This part of the process depends on the lender with whom you choose to work and your experience with Loan 7 (a). It can take up to ten days for your lender to get the SBA's approval for the secured loan. They also need time to process the reports associated with your loan application. So, check with your specific lender to see what their standard calendar looks like.

Is there a lot of paperwork?

Again, the exact process may depend on the specific lender with whom you choose to work. However, SBA forms 1919 and 1920 are required for all applications. Each of the forms has several pages.

What are the fees involved?

The SBA charges a warranty fee that varies depending on the amount of money guaranteed you receive. Usually, the percentage falls between 2 and 3.75% of the secured portion of the loan. And fees are due within 90 days of loan approval. Individual lenders may also charge a fee in addition to those of the SBA, but these fees must be reasonable and consistent with the additional fees that they would charge with other loans other than those of the SBA. SBA.

What should I do if I am rejected?

For those who are not approved on their first try, Harrow suggests to have expert ideas and to try again. Since rates are capped and guaranteed by the SBA, it is worth it for many companies to give it another chance. So, take advantage of the SBA's workshops on creating a business plan and applying for loans and see if your local can help you get in touch with a mentor who can guide you in your next request.

What are the alternatives if a loan 7 (a) is not possible?

If it is absolutely not possible for you to take advantage of the program, you can check in the other loan options of the SBA to see if any of them could be a better fit. There are also many alternative and online lenders that you can consider.

Harrow says, "Expand your options.If this is a situation where you are fighting to survive, shop around and look for other types of lenders.There are some companies that have popped up online. recently, such as Kabbage.So you can see if any of these lenders are willing to provide loans at reasonable rates.Make sure to compare rates and inquire about any fees involved. "

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