SBA 7a Loans - Everything You Need to Know
The hardest part of beginning your real estate project will likely be obtaining a loan. First, you must determine which type of loan is best for you. There are several eligibility requirements and financial implications that you must know before you apply for a loan. Then, you have to go through a complex application process.
That is why our professionals at SBA Expert are here to help. There are several types of Small Business Administration (SBA) loans that may be available to you, but the most common is the SBA 7a loan. Let’s look at what the SBA 7a loan is and why it may be the right fit for your business.
What can I finance with an SBA 7a loan?
The most common type of SBA loan is the 7a General Small Business Loan. The reason this type of loan is so common is because it is the right fit for most kinds of businesses.
An SBA 7a loan can be used for financing a wide range of projects, including construction, purchasing real estate or equipment, and business or franchise acquisition.
SBA 7a loan eligibility requirements
There are certain requirements you must meet in order to be eligible for an SBA 7a loan. However, these requirements can be very confusing. That is because eligibility requirements factor in the type of business you have or are proposing, and the principals of your business.
Some key eligibility factors include:
How your business receives income
Where your business operates
Although there are certain types of businesses that are not eligible for an SBA 7a loan, it is not clearly stated which types of business are eligible. However, there are some specific requirements in order to be eligible for a 7a loan:
Your business must operate for profit
Your business must meet the definition of small business set by the Small Business Administration
Your business must do business or is proposing to do business in the U.S.
You must have reasonable invested equity
You must use alternative financial resources, including personal assets, before you apply for an SBA 7a loan
You must demonstrate a need for the finances
You must use the funds for sound business reasons
You do not qualify if you are delinquent on an existing debt to the U.S. government
Generally speaking, you must have a solid credit score and sufficient collateral in order to qualify for an SBA 7a loan.
SBA 7a loan details
If you think the SBA 7a loan is the right type of loan for your project, you probably are wondering what the details of this loan are. Let’s break down how an 7a loan works.
There is no minimum amount for a 7a loan. The maximum amount you can borrow with this type of loan is $5 million. The length of the loan depends upon how you plan to use the finances from the loan. Terms can be up to 10 years for non-real estate transactions and up to 25 years for real estate. Borrowers must put down at least 10% in order to qualify.
Interest rates for 7a loans vary based on many factors, including your credit score, the amount of your down payment, and the length of the loan. Rates could be fixed or variable, depending upon the terms of your loan. Current interest rates for SBA 7a loans are between 5.75% and 8.25%. However, you should speak to our professionals at SBA Expert to get the most accurate rates for 7a loans.
Additionally, SBA 7a loans require some extra fees. These fees could include an SBA guarantee fee, referral and packaging fees, and closing costs. It is important to keep these additional costs in mind when going through the loan process so that you are not surprised by any fees.
How to apply for a 7a loan
Now that you have decided that an SBA 7a loan is the perfect fit for you, you can move forward with the application process. Before you do this, it is recommended that you speak to an expert. The application process is extremely complex, so you should first speak to a professional at SBA Expert to make sure you are choosing the right loan and completing the application correctly.
To apply for an SBA 7a loan, you will need to gather and complete the following documents and forms:
SBA loan application form (SBA form 1919)
Statement of personal history (SBA form 912)
Personal financial statement (SBA form 413)
Profit and loss statement current within 180 days of your application
Projected financial statements, including a one-year projection of income and finances
A list of names and addresses of any subsidiaries
Your original business license or certificate of doing business
Loan application history
Signed personal and business federal income tax returns from the previous three years
Personal résumés for each principal
A brief history of your business with an explanation as to why you need the funds from a loan
A copy of your business lease or note from your landlord
If you are planning to purchase an existing business, you will also need to submit:
A current balance sheet
Profit and loss statement from the business you are planning to purchase
Federal income tax returns for the business from the previous two years
A proposed bill of sale, including the terms of the sale
The asking price, along with the schedule of inventory, equipment, furniture and fixtures
Speak to the SBA Expert about SBA loans today
If you are ready to apply for an SBA loan, you do not want to go through this complicated process alone. You should speak to an expert with experience applying for and obtaining SBA 7a loans. At SBA Expert, our skilled professionals have years of experience helping clients successfully apply for SBA loans. Let us help you secure your loan.
We have a network of commercial lending firms and extensive knowledge of what it takes to acquire an SBA 7a loan. Our experts can meet with you to discuss plans for your project, and determine which loan is best for you.
Talk to our experts today if you’re interested in obtaining a loan for your commercial real estate project. Call SBA Expert at 949-439-1423 so we can begin helping you achieve your dream.