SBA 7(a) Loans
SBA 7(a) loans are the most basic and popular Small Business Administration (SBA) business loans. The name "7(a)" comes from section 7(a) of the Small Business Act, which authorizes the SBA to provide financing for America's small businesses.
SBA 7(a) loans are provided by authorized commercial lenders like CapitalSource Small Business Lending who participate in the program. The participating lender funds the loan and receives a guarantee of up to 75% of the loan amount from the SBA. This allows us to make loans to businesses that might not qualify for financing from other lenders. In addition to funding the loan, the participating lender is also responsible for administering the loan throughout its life.
All 7(a) loan applicants must meet the program's eligibility requirements, which are designed to be as broad as possible. Businesses must meet SBA size standards, must be "for-profit", must be without internal resources to provide the financing, and must be able to demonstrate repayment ability.
Loan Details
- CapitalSource Small Business Lending 7(a) loans can be used to purchase commercial real estate, machinery and equipment, fixtures and furniture, inventory and other business assets; to provide working capital; and to pay loan closing costs. CapitalSource Small Business Lending SBA 7(a) loans can also be used to refinance certain loans.
- Loans range from $250,000 to $2,000,000.
- Commitment letter typically within 3 days of completed application!
- Closing within 45–60 days of signed commitment letter.
- Up to 90%. Higher for medical professional borrowers.
- Floating rates, up to 2.75% over the Wall Street Journal Prime rate, adjusting monthly.
- Up to 25 years, fully amortizing over the life of the loan.
- The term offered is based upon the use of loan proceeds. Terms for assets categories are as follows:
- Real estate – up to 25 years.
- Working capital – 7 to 10 years.
- Machinery and Equipment – based on the useful life of the asset
- Prepayment penalties will apply.
- A one time SBA guarantee fee based on the dollar amount being guaranteed.
- SBA application packaging fee of $975.
- Good faith deposit to be used for loan closing costs.
- Loans must be ecured by commercial real estate or a combination of commercial real estate, residential real estate, machinery and equipment, and fixtures and furniture.
- All principals who own 20% or more of the business are required to provide a full guarantee. Principals or key managers owning less than 20% may be required to provide a guarantee on a case-by-case basis.
- The guarantee of affiliated companies may be required based on the percentage of ownership of the affiliate and the borrower's relationship with the affiliate.
- A minimum projected debt service coverage ratio of 1.25 times is required.
- Loans can be made to all businesses except those that do not meet SBA 7(a) eligibility requirements. These are primarily firms involved in real estate investment/speculation, gambling, adult entertainment, lending money and pyramid sales schemes. Firms involved in nuclear waste, utilities, natural resource development, fishing vessels, biotechnology and internet technology are also excluded from eligibility.
- Appraisal and Environmental reports will be required for real estate used as collateral.
- Borrowers cannot have filed for bankruptcy within the last three years.
- Life insurance on the principals of the company may be required.
