5/19/2021 7(a) Loans

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7(a) Loans
SBA’s most common loan program, which includes nancial help for
businesses with special requirements.

What is a 7(a) loan?

The 7(a) Loan Program, SBA’s most common loan program, includes financial help for small
businesses with special requirements. This is the best option when real estate is part of a business
purchase, but it can also be used for:

Short- and long-term working capital

Refinance current business debt
Purchase furniture, fixtures, and supplies

The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what
the business does to receive its income, its credit history, and where the business operates. Your
lender will help you figure out which type of loan is best suited for your needs.

Am I eligible?
To be eligible 7(a) loan assistance, businesses must:

Operate for profit

Be considered a small business, as defined by the SBA
Be engaged in, or propose to do business in, the United States or its possessions
Have reasonable invested equity
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Use alternative financial resources, including personal assets, before seeking financial
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assistance
Be able to demonstrate a need for a loan
Use the funds for a sound business purpose
Not be delinquent on any existing debt obligations to the U.S. government

Some businesses may not qualify for a 7(a) loan. Read more about what the SBA considers an
ineligible business.

What do I need to apply?

Once you have decided to apply for a loan guaranteed by the SBA, you need to collect the
appropriate documents for your application. The process starts by working with your local lender
within SBA guidelines.

Refer to the 7(a) Loan Application Checklist to see what you need to apply.

How do I use the 7(a) loan?

Basic uses for the 7(a) loan include:

Long- and short-term working capital

Revolving funds based on the value of existing inventory and receivables
The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
The purchase of real estate, including land and buildings
The construction a new building or renovation an existing building
Establishing a new business or assisting in the acquisition, operation or expansion of an
existing business
Refinancing existing business debt, under certain conditions

How do I pay back my 7(a) loan?

Loan repayment terms vary according to several factors:

Repayment terms

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Most 7(a) term loans are repaid with monthly payments of principal and interest.
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Payments stay the same for fixed-rate loans because the interest rate is constant
For variable rate loans, the lender can require a different payment amount when the
interest rate changes

Interest rates

3 Acceptable Base Rates:

Prime rate published in a daily national newspaper

London Interbank One Month Prime plus 3%
SBA Peg Rate

Maximum Allowable Spread:

Maturity < 7 years = 2.25%

Maturity > 7 years = 2.75%

Percent of Guaranty

SBA can guarantee up to:

85% of a loan up to $150,000

75% of a loan greater than $150,000

Existing borrowers
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Existing borrowers can create an account in the SBA Capital Access Financial System (or CAFS) to
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monitor their loan status. Get account enrollment instructions.

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U.S. Small Business Administration409 3rd St, SW. Washington DC 20416

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