What is the SBA 7(a) Program?
The 7(a) Loan Program is SBA’s primary program for helping small businesses with financing guaranteed for a variety of general business purposes.
| USES OF PROCEEDS· Equipment purchases (machinery, business vehicles) Permanent working capital Inventory Business expansion Business purchase/acquisition (Full or Partial) Real estate purchase Land acquisition and real estate construction· Real estate improvements· Refinance of existing business debt· Startup costs (case-by-case basis) AMOUNTS· Minimum- $10,000 Maximum – $5 Million MATURITY· Inventory or working capital- Typically structured at 7 years but not to exceed a maximum of 10 years Equipment, fixtures, or furniture- Typically structured at 7 years but not to exceed a maximum of 10 years, it may not exceed the economic useful life.· Real Estate, including acquisition, rehabilitation, renovation, or construction- Up to 25 years plus any interest period to reasonably complete the construction or improvements· 7(a) Refinancing- Must coincide with the remaining useful life of the assets being refinanced or use of proceeds chart | INTEREST RATE/OTHER TERMS Variable Rates – based on Prime Rate based on dollar amount of loan, term and collateral. Fully-Amortized over life of loan (No Balloon Payments) Pre-Payment Penalty- under 15 years None Over 15 years (1st 3 years)- 5,3,1 SBA Guaranty Fee-$1 Million or less= 0.0% $1M – $2M = 1.45% (Up to $1M plus 1.70% over $1 Mil $2,000,001- $5M= 3.5% (up to $1M plus 3.75% over $1 Mil(SBA changes SBA fees from time to time)· Lender may charge up to $2500 packaging fee. WHO QUALIFIES· Must be for profit and meet size standards Good Character and credit management Must be an eligible type of business BENEFITS FOR BORROWERS· Long term financing Improved Cash flow Fixed Maturity No balloon payments No prepayment penalty under 15 years |
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