7a Small Business Loans: What Are They and How to Get One
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What Is an SBA 7(a) Loan?
How an SBA 7(a) Loan Works
Eligibility for an SBA 7(a) Loan
Be a for-profit business Meet the SBA’s size requirements Do business in the US Have equity invested in the business Use other resources (including personal assets) before turning to SBA 7(a) loans Have a need for the loan funds and use the money for sound business purposes Have no outstanding or delinquent debts to the US government
How to Get an SBA 7(a) Loan
A personal background and financial statement Business financial statements Business certification and/or license Loan application history Income tax returns Resumes Business overview and history Business lease
Types of SBA 7(a) Loans
7(a) Small Loan
Export Working Capital
Seasonal CAPLine: Used to finance increased seasonal inventory needs Contract CAPLine: Used to finance costs of labor and materials for performing assignable contracts Builders CAPLine: Used to finance small builder or general contractor projects, including the construction and renovation of both residential and commercial properties Working CAPLine: Used for businesses that give credit to other businesses. It’s an asset-based line of credit that requires short-term payments.
SBA 7(a) Fees
Guaranty Fee: Ranges from 0.25% to 3.75% of the guaranteed portion of the loan, depending on the size of your loan Packaging Fee: Lenders can’t charge an origination fee, but they can charge for the services performed in processing the loan.
Pros and cons
Easier eligibility requirements compared to many other loans Competitive interest rates that are capped by the SBA Funds may be used for a wide variety of purposes Multiple options for loans of different sizes Slower funding timeframes compared to online small business loans Personal assets often required as collateral Down payment often required Extensive application checklist Usually need good credit to qualify
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