SBA 7(a) Loan Uses
Small businesses are the backbone of the American economy, and the Small Business Administration (SBA) has been helping entrepreneurs realize their dreams for many years. One of the most popular SBA loan programs is the SBA 7(a) loan, which offers a variety of uses for small business owners. In this article, we'll explore the basic underwriting requirements and uses for an SBA 7(a) loan, and how it can help small business owners achieve their goals.
Basic Underwriting Requirements:
The SBA 7(a) loan program has a few basic underwriting requirements that must be met before a loan can be approved. One of the most important requirements is that the borrower must have a 10% contribution towards the leasehold improvement costs, business purchase, or property purchase price. In other words, the borrower must have some skin in the game before the SBA will approve the loan.
Another important requirement is that the business must be operating for a minimum of 2 years. This helps ensure that the business is viable and has a track record of success. In addition, the borrower must have a good credit history and demonstrate the ability to repay the loan.
Uses for an SBA 7(a) Loan:
The SBA 7(a) loan program is a versatile financing option that can be used for a variety of purposes. One of the most popular uses is for small business owners who want to purchase the building they are currently renting. This can be an easy way to build equity and secure the long-term future of the business. The maturity term for commercial real estate secured SBA 7(a) loans is 25 years.
The SBA 7(a) loan can also be used to expand into a new location. This can be a great option for small business owners who want to grow their business but don't have the capital to do so on their own.
Another popular use for the SBA 7(a) loan program is for new and experienced franchisees who want to open another location. Franchising can be a great way to grow a business, and the SBA 7(a) loan program can provide the financing needed to make it happen. It’s simple and easy to secure financing for SBA approved franchises.
Finally, the SBA 7(a) loan program can be used to purchase existing businesses, as long as the new management team has expertise experience in the relevant industry. This can be a great way to acquire an established business and take it to the next level.
Benefits of an SBA 7(a) Loan:
One of the biggest benefits of the SBA 7(a) loan program is that it offers a high loan-to-value ratio of up to 90%. This means that small business owners can get the financing they need with a minimal down payment.
In addition, the maximum loan value is $5 million, which can provide significant capital for small business owners. The SBA also offers longer repayment terms ranging from 10 to 25 years, which can make monthly payments more manageable.
Finally, the SBA 7(a) loan program offers lower interest rates than many other types of loans. This can save small business owners thousands of dollars in interest over the life of the loan.
Conclusion:
The SBA 7(a) loan program is a versatile financing option that can help small business owners achieve their goals. Whether you want to purchase the building you are currently renting, expand into a new location, open another franchise location, or acquire an existing business, the SBA 7(a) loan program can provide the financing you need. With its low down payment, high loan-to-value ratio, longer repayment terms, and lower interest rates, the SBA 7(a) loan program is an attractive option for small business owners who need capital to grow and succeed.
Need working capital or purchasing a commercial building? SBA 7(a) loan program details are available on the SBA Financing Solutions page.