About the SBA 7(a) Loan
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.
A Flexible Commercial Finance Product
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 the purchase of owner-occupied real estate, leasehold improvements, equipment, working capital, business acquisition, partner buyouts, 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 an SBA 7(a) loan, however, if the loan is not fully collateralized the SBA will still support the loan based on other underwriting requirements.
Things to know before you apply:
Depending on your type of organization, we may need one or more of the following documents when opening your account:
- Department of State printout of business registration/Government-issued business license
- CPA-signed tax return
- Articles of Incorporation or Articles of Organization
- Bylaws or Operating Agreement
- Partnership Agreement
Have the following items available for your meeting with our experienced team:
- All current mortgage statements
- Current bank statements and/or account balances
- List of all owners having 20% or more ownership in the subject business along with any affiliates (if applicable)
- List of all current business debts and their respective monthly payments
- Tax Identification Number for the business and/or its affiliates.
- DUNS (Data Universal Numbering System) number