SBA 7a Loan
| The most common and basic type of SBA Loan is the 7(a) SBA Loans. The loan gets its name from Section 7(a) of the Small Business Act. The Small Business Act was created to assist Entrepreneurs acquire funding for their Small Business Ideas. The 7(a) is the most widely used of all the SBA Loans. |
| The SBA has a group of lenders that are approved to handle SBA Loans. These SBA Approved Lenders must voluntarily choose to participate in the SBA Loan Program. You will find that some of Lenders choose not to participate. A large number American Banks do participate in the SBA Loan Programs. Additionally there are some non-bank lenders that do participate as well in the SBA Loans Programs. |
| All SBA 7(a) Loans are only made available through a guaranty basis. This means that the SBA Approved Lenders have agreed and decided to structure the SBA Loans in accordance with the SBA’s requirements. The SBA Loan Program does not give you a 100% guaranty on 7(a) loans. This means that that the SBA Approved Lender and the SBA will share joint risk in each loan they approve and fund should the borrower fail to repay the loan. The guaranty is provided to insure against payment default, but it does not cover bad decisions by the SBA Approved Lender or any misrepresentations made by the borrower. |
| With this concept the SBA Approved Lender will make the loan and accept the administration of the SBA Loan. We recommend that you discuss this process in depth with the SBA Approved Lender to insure there are no misunderstandings. Develop a good relationship with your SBA Approved Lender as they can become great business partners with you as your business excels. |
| You will first apply to the lender (making sure this lender is a SBA Approved Lender) for financing for your business. The lender will look over your packet / application and decide if their Institution will provide funding for your business needs. If the Lending Institution feels that your application has some weaknesses, then they will decide if it will require a SBA Guaranty. This SBA Guaranty is to the SBA Approved Lender and not to the borrower. |
| The Guaranty assures the SBA Approved Lender that the Government will repay the amount of loss incurred by the SBA Approved Lender (up to the percentage of the SBA’s Guaranty). This type of guaranty is put in place to allow deserving Entrepreneurs to get the funding they need but would not be able to get without the SBA’s assistance. An important point for the borrower to remember is that the borrower is still responsible to repay the entire amount of the loan. Having this guaranty does not wipe out the debt with the borrower. |
| In order to acquire a SBA 7(a) loan, the borrower must meet all of the SBA 7(a) loan’s criteria. The borrower needs to make sure they understand the requirements for eligibility for acquiring a SBA Loan. If your credit score or your business credit score has some problems you will need to begin to fix this as soon as possible. Keep in mind that all loans, insurance costs and many others things are all tied to your credit score. The higher your score is the less percentage you will pay for loans or coverages. FOR THE BEST IN CREDIT REPAIR – CLICK HERE |
| The actual funding of your 7(a) SBA Loan comes from the SBA Approved Lender. The SBA does not give any money away, they only issue the Guaranty to the SBA Approved Lender. The SBA Approved Lender has the authority to not fund the loan even if the SBA will guaranty the loan. This part of the process is very important. Now you can see the importance of building a good working relationship with your SBA Approved Lender. Make sure that each time you deal with the SBA Approved Lender you show your best business and organizations skills. You want they to feel comfortable that you are going to be successful. |
| As we discussed the SBA cannot make loans, that is the responsibility of the SBA Approved Lender. It is critical that you understand the full requirements, develop and outstanding SBA Loan Package and do a great job at submitting the SBA Loan Package to the SBA Approved Lender. In most cases you will be much better off getting a professional SBA Loan Packaging Team to assist you. |
When Applying For A SBA Loan 7(a) your very first step is to see if you are eligible for this type of SBA Loan. By far the most important consideration in the SBA Loan Decision Process comes down to one item: Can you repay the loan on time? Other considerations that they will be looking at are:
By joining a Professional SBA Loan Packaging Team and Global Business Solutions Team, you can let them do all the heavy lifting and SBA Loan Packaging work, while you concentrate on more important aspects of moving your business forward. |
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The Eligibility Criteria that you will need to meet: Before you can even be considered for a SBA Loan 7(a), you will have to meet the SBA loans eligibility requirements. These requirements vary for each type of loan (which SBA Loan 7(a) is just one of the SBA Loan Programs). The SBA has done a nice job in designing the eligibility requirements as broad as they possible could. By doing this they have allowed accommodation of a wide variety of financial needs. All businesses submitting for a SBA Loan 7(a) will need to meet these basic requirements:
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| Your Character Considerations:
The SBA Loan Process will look into your history and determine if all the principals have shown a good history of repaying their debts on time and in good faith. They will also look to insure that all principles have a good history of following the laws and have been good citizens. These factors help the SBA Loan Process decide if your business has a good shot at repaying this SBA Loan. Be prepared to give a "Statement of Personal History" from each principal. Do your work up front to insure there will be no surprises. |
| Other Aspects Of The Basic 7(a) Loan Program
Besides the credit and eligibility criteria for your SBA Loan, you will need to be aware of the general types of terms and conditions of your SBA Loan Package. These terms and conditions outline what is expected if SBA is involved in the financial assistance. Your specific terms of your SBA Loan Package will be negotiated between an yourself and the participating financial institution, subject to the requirements of SBA. As a general rule, the following items apply to all SBA 7(a) loans. (It is important for you to note: Certain SBA Loan Programs or Lender Programs vary from these standards. These variations are indicated for each program). You will need to become familiar with these. Having a Team Of Professionals can make your life much easier…call us today! |
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Your SBA Maximum Loan Amounts SBA’s Loan Program 7(a) has a max loan amount of $2 million dollars. On a $ 2 million dollar loan the SBA’s maximum exposure is $1.5 million. Thus, if a business receives an SBA guaranteed loan for $2 million, the maximum guaranty to the lender will be $1.5 million or 75 percent. SBA Express loans still have a maximum guaranty set at 50 percent |
| Your SBA Loan Maturity
SBA loan programs are generally intended to encourage longer term small business financing but actual loan maturities are based on: the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. However, maximum loan maturities have been established: twenty-five (25) years for real estate and equipment with working capital loans being generally seven (7) years. Generally SBA Loans for working capital purposes will be due within seven years. There are some exceptions, for example: when a longer maturity (up to 10 years) may be needed to ensure repayment, the SBA Loan may be extended (but it not the norm) The maximum length of SBA Loans used to finance fixed assets (other than real estate) will normally be limited to the economic life of those assets. Which makes sense…you will do not want to be paying for something you can no longer use. The maximum length of any SBA Loan is 25 years. No SBA Loan will be approved for a longer duration. The 25-year SBA Loan maximum generally applies to the purchasing of land and buildings or the refinancing of debt incurred in their acquisition. When you are building new offices or business sites are to be constructed or significantly renovated, the 25-year maximum starts upon completion of construction. In order to qualify for the "significant renovation" clause in a SBA Loan, the renovations must be construction of at least one-third of the current value of the property. |
| Your SBA Loan 7(a) Interest Rates
Although your interest rates are negotiated with the SBA Approved Lender, the SBA Loan Program has placed maximum interest rates based on the prime rates. All SBA Approved Lenders must meet these guidelines from the SBA. I Your SBA Loan interest rates may be fixed or variable. We highly recommend you go with the a fixed rate and lock in exact repayment costs up front. Your SBA Loan’s fixed rate loans of $50,000 or more must not exceed Prime Plus 2.25 percent if the maturity is less than 7 years, and Prime Plus 2.75 percent if the maturity is 7 years or more. For SBA Loans between $25,000 and $50.000, maximum rates must not exceed Prime Plus 3.25 percent if the maturity is less than 7 years, and Prime Plus 3.75 percent if the maturity is 7 years or more. For SBA Loans of $25,000 or less, the maximum interest rate must not exceed Prime Plus 4.25 percent if the maturity is less than 7 years, and Prime Plus 4.75 percent, if the maturity is 7 years or more. |
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SBA Loan Guaranty Percents Once you have determined that you have met the SBA Loan Program’s credit and eligibility standards, the SBA can guaranty up to 85 percent of your SBA Loan when your SBA Loan is at $150,000 and less. If your SBA Loan is more than $ 150,000 the SBA guaranty up to 75 percent of your SBA Loan. The above maximums apply to almost all variations of the 7(a) Loan Program. |
| SBA Loan Fees In order for the SBA Loan Program to fund this program and offset the costs to the American Tax payers, the SBA Loan Program charges the SBA Approved Lenders a "Guaranty Fee" and a "Servicing Fee" for each SBA Loan that is approved and funded. The amount of the SBA Loan Fees are predicated upon the amount and percentage of the SBA Guaranty of the SBA Loan. The lender may charge an upfront guaranty fee to you the borrower but only after they pay the first funding amount to the borrower of the loan and after the SBA Approved Lender has paid the SBA the required fees. The following SBA Loan Fee Structure was designed in 2004 and took effect on December 8,2004. For loans approved on or after December 8, 2004, the following fee structure applies:
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| Combination Financing:
As of October 1, 2004, SBA Loans can no longer do a Combination Financing Prohibited Fees: The SBA has determined that the following Fees are not allowed:
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We hope that this information has been helpful to you. If you would a Team Of Professionals to assist you in taking your business to an entirely new level….contact us immediately and well assist you in exploding your profits. |
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