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What is a sba 7a loan

What Is the SBA 7a Loan Program

What is the SBA 7(a) loan program?

The 7(a) loan program is the name given to the basic loan offered by the Small Business Development Administration (SBA). This program guarantees the highest number of loans of all SBA loan programs. The program’s aim is to assist for-profit businesses gain access to capital when they are unable to raise finances from other Sources.

7 (a) Loan Program Requirements

The Small Business Administration provides loan guarantees to businesses and not to individuals. Loan eligibility is based on a company’s ability to meet the SBA’s predetermined standards. Such standards include: the business must meet size standards, must be a for-profit business, the business must not already be in possession of the internal resources necessary to provide its own financing, and the business must demonstrate the ability to repay the loan.

The maximum loan amount available through the 7(a) loan program is $5 million. Conversely, the SBA does not maintain a minimum loan amount.

Percentage of Guarantee

SBA guaranteed loans are subject to a fee. However, on loans of $150,000 or less the fee amount is set at zero percent. Loans greater than $150,000 that will mature within one year or less are subject to a fee of 0.25 percent. This fee is only applied to the guaranteed portion of the loan. On loan amounts ranging from $150,000 up to $700,000 with a maturity period of more than one year, the standard SBA fee is 3 percent of the guaranteed portion of the total loan amount. Loans greater than $700,000 incur a fee of 3.5 percent of the guaranteed portion of the loan. Guaranteed loan amounts of 1 million dollars or more incur an additional fee of 0.25 percent.

Interest rates are negotiated between the lender and the loan applicant. However, the interest rate that a lender is able to charge is subject to a maximum set by the SBA. Interest rates can be structured as fixed and variable according to the specific terms of the loan.

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