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SBA 7(a) Loan Program

The SBA 7(a) Loan Program is the flagship lending program for the SBA, compiling by far the largest amount of loans for the most dollars. The SBA does not actually provide the loan. Instead, they provide a loan guarantee to the bank as an enhancement for loans that do not typically fit in the lender’s conventional lending guidelines. The SBA charges a one-time fee of approximately 2.25% of the loan amount that is passed on to the borrower by the Lender. This fee creates the pool of dollars to pay off on the guarantee amounts when necessary. Loans submitted under the SBA’s Preferred Lender Program (PLP) do not require additional underwriting by SBA. First National Bank Small Business Finance is a Preferred SBA Lender.

The SBA 7(a) Loan Program is one of the most flexible commercial finance products available today. Proceeds can be used for a wide variety of business purposes, including purchase of owner occupied real estate, leasehold improvements, equipment, working capital, business acquisition, partner buy outs, and business startup expenses. It can also be used to refinance existing business debt that was used for any of these purposes. In many cases, different uses of proceeds can be accomplished all in one loan, which simplifies the loan process for the borrower and usually results in lower monthly payments than other financing products on the market. Typical loan terms range from 10 – 25 years and are fully amortizing, so there are no balloon payments. Depending on the use of proceeds, financing may range from 70% to 100% of Total Project Cost.

SBA 7(a) Loans have a maximum amount of $5 Million with no minimum amounts. Typically at First National Bank Small Business Finance, we consider loan requests from $350,000 up to $5,000,000. To be eligible for this type of loan, a business must be for profit and fall within a size limit of having a tangible net worth of less than $15 Million and have had an average profit of less than $5 Million in the last two years.

The SBA requires that all available collateral be taken to support a SBA 7(a) loan, however if the loan is not fully collateralized the SBA will still support the loan based on other underwriting requirements.

SBA 504 Loan Program

The SBA 504 Loan Program is used to finance the purchase of fixed assets, including owner occupied commercial real estate and equipment. Often referred to as a 50/40/10 loan, the program offers up to 90% financing for existing businesses. Typically the First Trust Lender (in our case, First National Bank Small Business Finance) would provide 50% financing, an arm of the SBA called a Certified Development Company (CDC) provides 40% financing, and the borrower injects 10% of the project cost in equity.

The SBA 504 Loan Program typically has terms up to 20 years with a fixed rate on the CDC portion. At First National Bank Small Business Finance, we typically offer a 25 year term on the First Mortgage with rates that adjust every 5 years. There is no minimum size for an SBA 504 Loan, and they can typically be used for projects up to $10 Million or more.

To be eligible for the SBA 504 Loan Program, a business must be for profit and fall within a size limit of having a tangible net worth of less than $15 Million and have had an average profit of less than $5 Million in the last two years. These loans are subject to underwriting by the bank, the CDC, and the SBA. SBA 504 loans have a job creation requirement of one new job for every $65,000 of loan proceeds.

SBA Express Loan

SBA Express Loans have a maximum amount of $350,000, and usually have a 5-7 year term. Loan proceeds can be used for all the same purposes as the SBA Advantage loan.

The SBA allows an Express Loan to be structured as either a straight term loan or as a credit line. At First National Bank Small Business Finance, we do not offer the Express Loan as a stand-alone product, but rather as an additional product along with an Advantage or Grow Loan as a credit line for working capital. Our typical structure on an Express Loan is to have a Working Capital Line that can be drawn on for two years, with any balance outstanding after two years to be repaid on a 5 year term for a total term of 7 years.

In general, the product advantages of a SBA guaranteed loan are:

  • Lower Equity Injection requirements to keep more working capital in the business
  • Longer term of loan to keep required payments lower every month
  • Fully amortizing loans – no balloon payments or refinance required
  • Combine many uses of funds into one loan (Advantage Loan)
  • No loan covenants that may impact business operations




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