SBA 7a Loan & SBA 7a FAST Loan (no tax returns)
SBA 7a Loan Features:
Eligible Properties:
Office, Industrial, Retail, Projections, and Special Use Properties
Occupancy:
51% Owner-User minimum
Loan amount range:
Up to $5 million
Interest Rate:
10.5% to 11.5% Quarterly adjustable rate
Loan Term:
25 years
Amortization:
25 years
Maximum LTV:
Up to 93% total LTV
Recourse:
Full recourse
Closing Timeframes:
45 days
Covenants:
No covenants
Transaction Types:
Commercial Property Purchase, Refinance, Renovation, or Working Capital
SBA 7a FAST Loan Features:
Eligible Properties:
Office, Industrial, and Retail
Occupancy:
51% Owner-User minimum
Loan amount range:
Up to $500,000
Financial Docs:
No tax returns and no financial docs
Must have 2+ years in business and no change in business ownership
Interest Rate:
13.5% to 14.5% Quarterly adjustable rate
Loan Term:
25 years
Amortization:
25 years
Maximum LTV:
Up to 93% total LTV
Recourse:
Full recourse
Prepayment:
3 year penalty
Closing Timeframes:
21 to 30 days
Covenants:
No covenants
Transaction Types:
Commercial Property Purchase, Refinance, Renovation, or Working Capital Great program for rent replacement, or expansion purchase deals, or refinances
The SBA 7a loan program is one of the most popular loan programs offered by the U.S. Small Business Administration (SBA). It provides financing to small businesses for a variety of purposes, making it a flexible and accessible option for many entrepreneurs and business owners. Here’s a detailed overview:
- Purpose:
- Flexible Use: SBA 7a loans can be used for a wide range of purposes, including working capital, purchasing equipment or inventory, acquiring real estate, refinancing existing debt, and more. This makes it a versatile option for various business needs.
- Loan Amounts:
- Maximum Amount: SBA 7a loans can be up to $5 million. The exact amount depends on the borrower’s needs and the lender’s evaluation of the application.
- Terms:
- Repayment Period: The repayment term for SBA 7a loans varies based on the purpose of the loan. Terms can be up to 10 years for working capital and equipment, and up to 25 years for real estate purchases.
- Interest Rates:
- Variable or Fixed Rates: Interest rates on SBA 7a loans can be fixed or variable, and are typically based on the prime rate plus a margin. The SBA sets maximum interest rate limits to ensure that rates remain reasonable.
- Down Payment:
- Equity Contribution: While the SBA does not require a specific down payment, lenders may require a down payment or equity contribution, particularly for real estate or equipment loans. This is usually around 7% of the loan amount.
- Eligibility:
- Small Business Criteria: To qualify, the business must meet SBA size standards, which generally involve being a for-profit business with tangible net worth and average net income below certain thresholds.
- Creditworthiness: Borrowers must demonstrate good credit history, ability to repay the loan, and a sound business plan. SBA 7(a) loans are not available for businesses involved in illegal activities or speculative investments.
- Collateral:
- Secured Loans: SBA 7(a) loans are generally secured by the business’s assets, and in some cases, personal assets may also be required. The SBA does not require personal guarantees for all loans, but lenders may.
- Fees:
- Guarantee Fee: The SBA charges a guarantee fee, which is a percentage of the loan amount and varies based on the loan size and term. This fee is often rolled into the loan amount or paid upfront.
Benefits of SBA 7a Loans
- Access to Capital:
- Large Loan Amounts: SBA 7a loans provide substantial financing for small businesses, which can be particularly valuable for larger projects or growth initiatives.
- Flexible Terms:
- Versatility: The loan can be used for a wide range of business purposes, offering flexibility to meet diverse needs.
- Lower Down Payments:
- Reduced Equity Requirements: The lower down payment requirements compared to conventional loans can make it easier for businesses to obtain financing.
- Competitive Interest Rates:
- Reasonable Rates: Often come with competitive interest rates, as the SBA sets maximum rates to ensure affordability.
- Longer Repayment Terms:
- Extended Terms: Longer repayment periods help reduce monthly payments and ease the financial burden on businesses.
Risks and Considerations
- Application Process:
- Complexity: The application process for SBA 7a loans can be complex and require detailed documentation, including financial statements, business plans, and personal financial information.
- Fees:
- Guarantee Fees: The SBA guarantee fee, while often manageable, adds to the overall cost of the loan.
- Collateral and Guarantees:
- Secured Loan: SBA 7(a) loans are generally secured by business and personal assets, which may involve risk if the business faces financial difficulties.
- Eligibility Requirements:
- Criteria: Businesses must meet specific eligibility criteria, including size standards and creditworthiness, which may not be suitable for all applicants.
- Approval Time:
- Processing Time: The approval and funding process can take several weeks, which may be longer than some private lending options.
Application Process
- Prepare Documentation:
- Business Plan: Develop a comprehensive business plan outlining the purpose of the loan, financial projections, and business strategy.
- Financial Statements: Gather financial statements, including balance sheets, income statements, and cash flow projections.
- Personal Information: Provide personal financial information and credit history.
- Submit Application:
- Loan Application: Complete and submit the loan application along with required documentation.
- Loan Review and Approval:
- Lender Evaluation: The lender reviews the application and, if approved, submits it to the SBA for guarantee. The SBA reviews the loan for compliance with its guidelines.
- Funding:
- Disbursement: Upon approval, the loan is disbursed, and funds are provided for the intended use.
In summary, SBA 7a loans offer a flexible and accessible financing option for small businesses, with benefits such as large loan amounts, competitive rates, and extended terms. However, the application process can be detailed and complex, and businesses must meet specific eligibility requirements.
Don’t forget about our popular SBA 7a FAST loan option that does not require any tax returns or financials. Both SBA loan programs allow you to get your foot in the door with only needing a 7% down payment.
Explore the diverse range of commercial real estate and small business loan programs available at Groves Capital by clicking, or tapping the loan programs link. Discover what sets Groves Capital apart in the realm of commercial real estate financing, and find out how our unique approach can benefit your business and financial needs.