Looking for a small business loan can be a complicated proposition for most. The most common loan that is offered by the U.S. Small Business Administration (SBA) programs is the 7(a).
Here is some important information you need to know about the 7(a) loan:
- A 7(a) loan does not come directly from the SBA but rather an authorized SBA lender makes the loan and the SBA guarantees a portion of it, which limits much of the risk for the lender.
- In order to be eligible for a 7(a) loan you must meet these requirements:
o Operate as a for-profit entity
o Meet the SBA’s definition of a small business.
o Conduct business in the U.S.
o Have personal invested equity in the company
o Be able to demonstrate a need for the loan
o Use the loan for sound business purposes
o Not be delinquent on any debt obligations to the U.S. government.
- 7(a) loans can be as large as $5 million with no set minimum.
- Payments are made monthly and include a combination of principal and interest just like a traditional loan.
- Lenders will apply the same criteria they would with a traditional loan, but since SBA is involved the standards are more relaxed. Here are the what lenders look at the most:
o Working Capital
o Resource Management
- Most major banks have SBA 7(a) loan programs.
If you have any more questions or comments on how SBA 7(a) loans work and if you are eligible feel free to give Mitchell & Mitchell Insurance Agency a call, toll free at 1-888-512-8878.