SBA 7a Loans for Small Business
Our SBA 7a Loans can be used to start or acquire a business* or franchise, access working capital for equipment purchases or inventory, buyout a partner(s), and expand or refinance your business.
* Today we’re seeing a lot of SBA approvals for business acquisitionsFree Consultation – No Obligation
What Do You Need To Qualify?
- 2 Years in Business
- $500k in Annual Revenue
- 680 Credit Score
- What is a SBA 7a Loan?
- How does a SBA 7a Loan Work?
- How can I use my SBA 7a Loan?
- How can I qualify for a SBA 7a Loan?
- What are the advantages of a SBA 7a Loan?
- What are the disadvantages of a SBA 7a Loan?
- Pros and Cons of a SBA 7a Loans
- How to apply for a SBA 7a Loan?
- What if I am declined for a SBA 7a Loan?
What Is SBA 7a Loan?
SBA 7a loans are backed by the government SBA (Small Business Association) agency for the purpose of financing US small businesses.
SBA loans are one of the most desirable and sought-after types of business loans. Many small business owners apply for SBA loans before exploring other similar options. Between lower interest rates and substantially longer repayment terms, SBA loans tend to give you the funding you need without disrupting your cash flow.
There are only three types of financial institutions through which to apply for an SBA loan: commercial banks, credit unions or alternative business financing facilitators like CSB Capital Funding.
What makes an SBA Loan different from other business loans is the SBA guarantees up to 85% of loans up to $150,000 and up to 75% of loans over that amount up to $500,000.
How does SBA 7a Loan Work?
The application process tends to be a bit longer for SBA 7a business loans because of the added scrutiny of the SBA process. Typical turnaround is 15-30 days but can extended to 45-60 days in certain situations. This is a significantly shorter turnaround than commercial banks. Why? Because all CSB Capital Funding affiliates are delegated authorities of the SBA Preferred Lender Program (PLP). This means they can perform their own underwriting and make lending decisions without subsequent approval from the government SBA agency. This significantly reduces the approval process and turnaround time.
SBA 7a loans have better terms then other loan products. They typically require a minimum 10% capital injection by the borrower (although we do have lenders that will accept no down payment) and a good personal credit score.
You can access up to $5M, with repayment terms of up to 25 years and virtually no pre-payment restrictions (3 yrs only and flexibility even within those first 3 yrs), depending on the type of investment.
How can I use my SBA 7a Loan?
Business Growth
Buy new equipment or inventory, hire new staff, or prepare for seasonal changes.
Business Expenses
Get extra working capital to manage payroll, bridge gaps in cash flow, or pay bills.
Business Opportunities
Expand or open a second location, take on more clients, or capitalize on bulk order discounts.
Business Acquisitions
Is a competitor retiring and looking to relinquish their business? You can acquire that business with up to $2M towards “Goodwill”*
Small Business Administration loans can be used for “most” business purposes, including working capital, equipment, construction of buildings, purchasing land, and much more. You can’t use one for investment real estate (to sell or lease), refinance existing debt that would “expose the SBA to a loss,” pay delinquent taxes, or to relocate the borrower from a community where their departure would result in a significant increase in unemployment.
*Goodwill refers to the intangible asset that arises when someone purchases a business for more than the value of its tangible assets like real estate or equipment. Goodwill typically includes brand value, customer relationships, and employee relationships, as well as any patents, trademarks, and copyrights that a business has.
How Can I Qualify For a SBA 7a Loan?
If you’re looking to use an SBA loan for any purpose other than acquiring an existing business, here are the standard requirements:
- 2+ years in business
- $500,000+ in annual gross sales
- 685+ credit score
If you’re looking to use an SBA loan to purchase an existing business, the requirements are:
- 10% down payment
- 680+ credit score
- Industry/managerial experience
- No criminal history (or the ability to explain misdemeanors on your record)
- No current federal debt
- If purchasing a franchise, a paid franchise fee
Your business, or the business you’re looking to purchase, must also fall within the SBA’s overarching eligibility criteria. Outside of the traditional minimum credit score, time in business, and annual gross sales requirements, your business (or the one you’re looking to purchase) must:
- Operate for profit
- Do business within the U.S. (or propose to)
- Have “reasonable” owner equity to invest
- Have sought out alternative resources, like personal savings and assets, before seeking assistance through the SBA
What Are The Advantages of a SBA 7a Loan?
- Low rates
- High borrowing limits
- Long terms
- No collateral requirement with business acquisition (i.e. 1st $2M of loan is un-collateralized)
What Are The Disadvantages of a SBA 7a Loan?
- The approval process is longer
- The paperwork involved is more tedious
- Requirements may differ amongst lenders
Pros
- Low interest rates
- Longest repayment terms
- Use for a variety of business purposes
- Up to $2M towards Goodwill (for business acquisitions)
- Fixed Rates Available
Cons
- Lengthy approval process
- Large amount of paperwork
- Possible collateral requirements
- Good to Excellent credit required
How to Apply for a SBA 7a Loan?
Ensure you have a good credit score of 680+ and your cash flow is consistent especially over the past 90 days
Be prepared to discuss in detail the purpose of the funds as we will have to create a sufficiently compelling executive summary
For business acquisitions, we’ll need to provide the following:
- Last THREE years of Personal Tax Returns from the prospective buyer of the business
- Personal Financial Statement from the prospective buyer of the business
- Borrower Resume
- Last THREE years of Business Tax Returns from the business being purchased
- Year-To-Date Financial Statement (balance sheet and P&L) less than 60 days old from the business being purchased
- The letter of intent and/or purchase contract for the business acquisition OR an Executive Summary highlighting the total project costs of the business acquisition project being requested.
What If I am Declined for a SBA 7a Loan?
Do not be discouraged. We have other loan products that are more costly, but the turnaround time is significantly faster. Check out our home page for other lending products that might meet your needs or give us a call an we’ll offer some suggestions.
What is a SBA 7a Loan?
SBA 7a loans are backed by the government SBA (Small Business Association) agency for the purpose of financing US small businesses.
SBA loans are one of the most desirable and sought-after types of business loans. Many small business owners apply for SBA loans before exploring other similar options. Between lower interest rates and substantially longer repayment terms, SBA loans tend to give you the funding you need without disrupting your cash flow.
There are only three types of financial institutions through which to apply for an SBA loan: commercial banks, credit unions or alternative business financing facilitators like CSB Capital Funding.
What makes an SBA Loan different from other business loans is the SBA guarantees up to 85% of loans up to $150,000 and up to 75% of loans over that amount up to $500,000.
How does a SBA 7a Loan Work?
The application process tends to be a bit longer for SBA 7a business loans because of the added scrutiny of the SBA process. Typical turnaround is 15-30 days but can extended to 45-60 days in certain situations. This is a significantly shorter turnaround than commercial banks. Why? Because all CSB Capital Funding affiliates are delegated authorities of the SBA Preferred Lender Program (PLP). This means they can perform their own underwriting and make lending decisions without subsequent approval from the government SBA agency. This significantly reduces the approval process and turnaround time.
SBA 7a loans have better terms then other loan products. They typically require a minimum 10% capital injection by the borrower (although we do have lenders that will accept no down payment) and a good personal credit score.
You can access up to $5M, with repayment terms of up to 25 years and virtually no pre-payment restrictions (3 yrs only and flexibility even within those first 3 yrs), depending on the type of investment.
How can I use my SBA 7a Loan?
Business Growth
Buy new equipment or inventory, hire new staff, or prepare for seasonal changes.
Business Expenses
Get extra working capital to manage payroll, bridge gaps in cash flow, or pay bills.
Business Opportunities
Expand or open a second location, take on more clients, or capitalize on bulk order discounts.
Business Acquisitions
Is a competitor retiring and looking to relinquish their business? You can acquire that business with up to $2M towards “Goodwill”*
Small Business Administration loans can be used for “most” business purposes, including working capital, equipment, construction of buildings, purchasing land, and much more. You can’t use one for investment real estate (to sell or lease), refinance existing debt that would “expose the SBA to a loss,” pay delinquent taxes, or to relocate the borrower from a community where their departure would result in a significant increase in unemployment.
*Goodwill refers to the intangible asset that arises when someone purchases a business for more than the value of its tangible assets like real estate or equipment. Goodwill typically includes brand value, customer relationships, and employee relationships, as well as any patents, trademarks, and copyrights that a business has.
How can I qualify for a SBA 7a Loan?
If you’re looking to use an SBA loan for any purpose other than acquiring an existing business, here are the standard requirements:
- 2+ years in business
- $500,000+ in annual gross sales
- 685+ credit score
If you’re looking to use an SBA loan to purchase an existing business, the requirements are:
- 10% down payment
- 680+ credit score
- Industry/managerial experience
- No criminal history (or the ability to explain misdemeanors on your record)
- No current federal debt
- If purchasing a franchise, a paid franchise fee
Your business, or the business you’re looking to purchase, must also fall within the SBA’s overarching eligibility criteria. Outside of the traditional minimum credit score, time in business, and annual gross sales requirements, your business (or the one you’re looking to purchase) must:
- Operate for profit
- Do business within the U.S. (or propose to)
- Have “reasonable” owner equity to invest
- Have sought out alternative resources, like personal savings and assets, before seeking assistance through the SBA
What are the advantages of a SBA 7a Loan?
- Low rates
- High borrowing limits
- Long terms
- No collateral requirement with business acquisition (i.e. 1st $2M of loan is un-collateralized)
What are the disadvantages of a SBA 7a Loan?
- The approval process is longer
- The paperwork involved is more tedious
- Requirements may differ amongst lenders
Pros and Cons of SBA 7a Loans
Pros
- Low interest rates
- Longest repayment terms
- Use for a variety of business purposes
- Up to $2M towards Goodwill (for business acquisitions)
- Fixed Rates Available
Cons
- Lengthy approval process
- Large amount of paperwork
- Possible collateral requirements
- Good to Excellent credit required
How to apply for a SBA 7a Loan?
Ensure you have a good credit score of 680+ and your cash flow is consistent especially over the past 90 days
Be prepared to discuss in detail the purpose of the funds as we will have to create a sufficiently compelling executive summary
For business acquisitions, we’ll need to provide the following:
- Last THREE years of Personal Tax Returns from the prospective buyer of the business
- Personal Financial Statement from the prospective buyer of the business
- Borrower Resume
- Last THREE years of Business Tax Returns from the business being purchased
- Year-To-Date Financial Statement (balance sheet and P&L) less than 60 days old from the business being purchased
- The letter of intent and/or purchase contract for the business acquisition OR an Executive Summary highlighting the total project costs of the business acquisition project being requested.
What if I am declined for a SBA 7a Loan?
Do not be discouraged. We have other loan products that are more costly, but the turnaround time is significantly faster. Check out our home page for other lending products that might meet your needs or give us a call an we’ll offer some suggestions.
SBA 7a Loan Amount, Rate, Term and Time to Fund
-
Loan Amount
$350k - $5M -
Interest Rate
9.0% - 12.0% fixed -
Term
5 years - 25 years -
Time to Fund
30 - 45 days
Frequently Asked Questions
How does a SBA 7a Loan compare to other Small Business Loan options?
Financing Type | Financing Amount | Interest Rate | Term | Time to Fund |
Accounts Receivable Financing | $10k – $10M (advance rate of up to 90%) | 1% – 2% p/mo | 3 months – 5 years | 1 – 3 business days |
Business Line of Credit | $5k – $1M | Starting at 1% p/mo | 12 – 36 months | 7 – 14 days |
Equipment Financing | $10k – $25M | 1% – 2% p/mo | 12 – 72 months | 1 – 3 business days |
SBA 7a Loan | $350k – $5M | 9% – 12% fixed | 5 years – 25 years | 30 – 45 days |
Supply Chain Financing | $250k – $25M | 1% – 2% p/mo | 30 – 150 days (re-usable) | 2 – 3 weeks |
Unsecured Business Line of Credit | $5k – $100k | 1% – 2% p/mo | 1 – 2 years | 1 – 3 business days |
SBA 7a Loan | |
Financing Amount | $350k – $5M |
Interest Rate | 9% – 12% fixed |
Term | 5 years – 25 years |
Time to Fund | 30 – 45 days |
Accounts Receivable Financing | |
Financing Amount | $10k – $10M (advance rate of up to 90%) |
Interest Rate | 1% – 2% p/mo |
Term | 3 months – 5 years |
Time to Fund | 1 – 3 business days |
Business Line of Credit | |
Financing Amount | $5k – $1M |
Interest Rate | Starting at 1% p/mo |
Term | 12 – 36 months |
Time to Fund | 7 – 14 days |
Equipment Financing | |
Financing Amount | $10k – $25M |
Interest Rate | 1% – 2% p/mo |
Term | 12 – 72 months |
Time to Fund | 1 – 3 business days |
Supply Chain Financing | |
Financing Amount | $250k – $25M |
Interest Rate | 1% – 2% p/mo |
Term | 30 – 150 days (re-usable) |
Time to Fund | 2 – 3 weeks |
Unsecured Business Line of Credit | |
Financing Amount | $5k – $100k |
Interest Rate | 1% – 2% p/mo |
Term | 1 – 2 years |
Time to Fund | 1 – 3 business days |
Can I use an SBA loan for non-profit purposes?
No
How long does SBA loan approval take?
Through CBS Capital Funding in as little as 3-5 weeks. If you go through a commercial bank or credit union the process normally takes 4-6 months.
How much cash flow am I expected to have?
Your Debt Service Coverage Ratio (DSCR) for the current year should be 1.25x. This means the revenue of your business should be 1.25x your outstanding debt or higher.
Are there loan covenants to consider?
Most banks require a 1.25 DSCR covenant. As an example, if you take out a $1M SBA loan with a bank, your are expected to make 1.25x the cost of the loan in revenue every year. If you fall below that amount, the bank has the right to recall the loan even if you’ve never missed a payment!
At CSB Capital Funding, our SBA loans have no such loan covenants.
Ready to take the next step and apply for a SBA 7a Loan?
Free Consultation – No Obligation