Use of loan proceeds
7(a) loans can be used for:
- Acquiring, refinancing, or improving real estate and/or buildings
- Short- and long-term working capital
- Refinancing current business debt
- Purchasing and installation of machinery and equipment
- Purchasing furniture, fixtures, and supplies
- Changes of ownership (complete or partial)
- Multiple purpose loans, including any of the above
The maximum loan amount for most 7(a) loans is $5 million. Nevertheless, the maximum loan amount for 7(a) loans made through the Export Express and SBA Express delivery methods is $500,000.
SBAs maximum exposure (i. e. , dollars guaranteed) is $3. 75 million. Nonetheless, foreign trade loans may be eligible for a maximum guarantee of 90% or $4,000. 5 million. When combined with any other active 7(a) loan for working capital, the guaranteed working capital amount for the International Trade loan cannot exceed $4 million.
SBA guarantees up to 85% of loans totaling $150,000 or less and up to 75% of loans totaling more than $150,000 for the majority of 7(a) loan programs. However, SBA provides a 50% guaranty on SBA Express loans. The SBA offers a 90% guarantee for loans made through Export Express, Export Working Capital Program (EWCP), and International Trade.
The term of a 7(a) loan will be:
- the shortest term that is suitable, given the borrower’s capacity to repay;
- Ten years or less, unless it is used to finance or refinance equipment or real estate that has a useful life longer than ten years. When it becomes necessary to finish the equipment installation or the leasehold improvements, the term of a loan to finance equipment and/or leasehold improvements may include an additional reasonable period, not to exceed 12 months.
- A maximum of 25 years, including extensions. (A loan used to purchase or renovate real estate may have a 25-year term plus an extra year if more time is required to finish the improvements or construction.) ).
Negotiated between the borrower and the lender, interest rates on 7(a) loans are subject to SBA maximums, which are based on either an optional peg rate or the prime rate. Interest rates may be fixed or variable.
The maximum fixed interest rates are posted by SBA on its FTA wiki.
The following are the maximum interest rates applicable to variable 7(a) loans:
| Loan amount | Max rate |
|---|---|
| $50,000 or less | Base rate plus 6.5% |
| $50,001 to $250,000 | Base rate plus 6.0% |
| $250,001 to $350,000 | Base rate plus 4.5% |
| Greater than $350,000 | Base rate plus 3.0% |
Fees the lender pays SBA
For each loan guaranteed by the 7(a) program, lenders are required to pay an Upfront Fee (also called an SBA Guaranty Fee), though they are allowed to pass the fee’s cost on to the borrower.
The outstanding principal balance of the guaranteed portion of a loan at the time of SBA loan approval determines the lender’s annual service fee, also known as the SBA On-Going Guaranty Fee. This fee cannot be charged to the borrower.
Through an Information Notice, SBA makes available the total amount of the Upfront Fee and the Lender’s Annual Service Fee for all loans approved in a given fiscal year.
Fees lenders and agents may charge the borrower
SOP 50 10 and the 13 CFR § 120 regulation 221 includes details on possible costs that lenders and agents could impose on the borrower.
Prepayment penalties apply to loans with a 15-year maturity or longer in the following situations:
- Prepayment of at least 25% of the loan’s outstanding balance is made voluntarily by the borrower.
- Within the first three years following the date of the loan proceeds’ initial disbursement, the prepayment is made.
The prepayment fee is:
- In the first year following payment, five percent of the total amount of the advance
- In the second year following the payment, 3% of the total amount of the repayment
- In the third year following the payment, one-third of the total amount of the advance
SBA lenders finance small businesses Lenders that work with SBA provide financial assistance to small businesses through government-backed loans.
FAQ
How much can you borrow on a SBA loan?
The maximum loan amount for most 7(a) loans is $5 million. Nevertheless, the maximum loan amount for 7(a) loans made through the Export Express and SBA Express delivery methods is $500,000. SBA’s maximum exposure (i. e. , dollars guaranteed) is $3. 75 million.
Is it hard to get a loan from SBA?
Because they’re backed by the U. S. government, banks find them less hazardous than making their own loan issuance. However, online business loans, which may require less time in business and lend to borrowers with lower credit scores, are typically easier to obtain than SBA loans.
How much money down do you need for a SBA loan?
Does the SBA require a down payment? If so, what is the minimum down payment requirement for SBA loans? It is 2010, and it is based on a business’s cash flow and collateral for both 207(a) and 504% loans. It is possible for low-value or weak cash flow to raise the down payment requirement to as much as 200% of the total loan amount.
What is the easiest SBA loan to get approved for?
SBA Express offers longer terms and a lower down payment than conventional loans, along with the simplest SBA application process and the fastest approval times.
Read More :
https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility
https://www.fundingcircle.com/us/resources/sba-loans/