An SBA 7(a) Loan Can Unlock Your Company's Potential

May 8, 2024 Leah Driver

Businesswoman Moving into a New Office due to Funds from an SBA Loan

The agency that eventually became the Small Business Administration (SBA) was started after the Great Depression to preserve a free competitive business environment in order to grow and maintain the national economy. While the SBA supports and empowers America’s small businesses in multiple ways ― including advocacy, entrepreneurial development, and government contracting ― access to capital is often the key that allows entrepreneurs to start, grow, and expand their business.

One of the primary advantages of working with the SBA for business owners is the partial loan repayment guarantee they provide, which makes it possible for lenders to extend credit to companies that might not qualify for a traditional commercial loan. The lowered risk for the lender also means a more competitive interest rate than might be available with a traditional commercial loan. Moreover, SBA loans offer flexible repayment terms, allowing businesses to manage their cash flow and focus on growth.

SBA 7(a) Loan Types

The SBA offers multiple funding options, but the 7(a) loan program, offered in partnership with approved lenders, is the primary tool for providing financial assistance to small businesses and includes the following loan types:

  • Standard 7(a) Loans are greater than $500,000 and are guaranteed up to 75% by the SBA.
  • 7(a) Small are term loans $500,000 or less and the SBA guarantees up to 85% for loans up to $150,000 and 75% for loans greater than $150,000.
  • SBA Express loans have a maximum of $500,000 and can be processed by the lender without SBA review in exchange for a guarantee of up to 50%. The Express can be used as a revolving line of credit with a term of up to 10 years.
  • The Export Express program guarantees up to $500,000 in either a revolving line of credit or term loan to support companies that wish to develop the export side of their business. The SBA guarantees 90% for loans of $350,000 or less, 75% for loans more than $350,000.
  • The Export Working Capital Program (EWCP) is designed for businesses that need additional working capital to support export sales. The maximum loan amount is up to $5 million and the revolving line of credit maximum term of 36 months.
  • The 7(a) International Trade loan program makes up to $5 million available to existing exporters to improve their competitive position or develop new export markets and are guaranteed up to 90% by the SBA.
  • CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs.

To take advantage of the SBA 7(a) loan program, businesses must meet eligibility criteria, such as being for-profit, operating in the United States, and falling within the SBA's size standards, which can vary by industry. Additionally, lenders may have their own requirements, such as a minimum credit score, collateral, or a minimum level of experience. Businesses that don’t meet the requirements might still be able to find alternative financing options that are more suitable.

SBA 7(a) Loan Application Process

The first step in applying for an SBA 7(a) loan is to find an SBA lender in your area. You can do this by:

While you’re in the process of finding an SBA-approved lender, you can gather information you’ll need to apply, like:

  • The latest version of your business plan
  • SBA Form 1919
  • Your business certificate or license
  • Your credit history and income tax returns
  • Financial statements and projections
  • Resumes for each business owner
  • Business overview and history

While your lender should be able to guide you through the application process, there are other resources. like the Indiana Small Business Development Center or Bankable, that can help you navigate the process and prepare the necessary documentation.

In Conclusion

Ultimately, the SBA 7(a) loan program represents a powerful tool for small businesses seeking to grow, expand, and thrive. By taking advantage of this financing option, you can unlock your company's full potential and position it for long-term success.

Businessman with Banker Reviewing Financial Statements

The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.

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