SBA Loan Programs

As with the vast majority of SBA loan programs, funding provided through the 7(a) loan program doesn’t actually come from the Small Business Administration. Rather, the borrowing process works similarly to a traditional bank loan, with the only difference being that the SBA acts as a guarantor to reduce the level of risk to lenders. Many large banks loan money as part of the 7(a) loan program, along with several community banks and some online banks.

Since the 7(a) loan program offers so much flexibility in use of funds, it is far easier to narrow down the individual businesses or circumstances for which 7(a) loans are not a good fit.

You can’t use this SBA loan program to reimburse a business owner for outstanding expenses, to pay delinquent taxes, or to buy out one of your business owners.

Other than that, you’re good to go! General working capital. Purchasing a building or equipment. Paying the salaries of your employees until you turn a profit. Purchasing inventory or general supplies. Pretty much any expense you can think of can be covered by a loan from the 7(a) program. This is what makes the 7(a) loan program the default choice for most small business owners seeking funds through the US Small Business Administration.

To qualify for the 7(a) program, the small business owner must have a strong personal credit history (a FICO score of at least 650 is typical), and the business should have a solid financial record. You’ll also need to put up some collateral and sign a personal guarantee. Although new businesses can sometimes qualify, most successful applicants have been operating their businesses for two years or more.

Interest rates on 7(a) loans vary based on your intermediary lender as well as the size of your loan and repayment schedule. The SBA sets maximum interest rates that lenders can’t exceed. Subject to those maximums, individual lenders will determine the exact rate depending upon the applicant’s qualifications and the level of industry risk facing each business.

Those maximums vary from Prime + 2.25% to Prime + 4.75%. The Prime Rate is a market interest rate that serves as a benchmark for many types of loans. In addition to your interest rates, fees also affect your loan cost. The main fee on SBA 7(a) loans is the SBA guarantee fee, which goes up to 3.75% of the guaranteed amount of the loan.

You can learn more about the cost of 7(a) loans in our post on SBA loan rates. Since the SBA mandates the maximum interest rates on SBA loans, funds you obtain through the 7(a) loan program tend to carry some of the most affordable interest rates around.

Repayment terms range between 5 to 25 years on 7(a) loans depending on what you’re using the loan for. The longest terms are for real estate purchases, and the shortest terms are for working capital.

Several lenders participate in the 7(a) loan program. This includes large banks like Chase, Bank of America, and Wells Fargo, as well as smaller community banks. Whenever possible, apply through an SBA Preferred Lender. These lenders are authorized to make approval decisions without the SBA’s review, which speeds up the application process.

Your SBA loan application will require a lot of paperwork and details, so we recommend allowing at least six weeks for the application process before you need cash in hand. Online platforms like SmartBiz speed up the application process. A Fundera loan specialist can help you determine if you’re eligible for the SBA 7(a) loan program and put together your loan application.

Within the umbrella of the 7(a) loan program, there are actually more SBA loan programs. Beyond the general 7(a) standard loan, there are different types of SBA loans for certain industries, financing needs, and entrepreneurial demographics. These SBA loan programs are less common than the standard 7(a) loan, but they could be a good fit for some businesses.

Here are the loan programs under the 7(a) loan umbrella.

7(a) Small Loan

Loans up to $350,000. The SBA determines eligibility, and the turnaround time (5 to 10 days) is faster than the traditional 7(a) loan.

SBA Express

Loans up to $350,000 with a faster turnaround time. These loans have a 36-hour turnaround for approval, but that means smaller loan amounts and higher interest rates. If you’re looking for the SBA’s Patriot Express Loan Program, it’s no longer active—but the SBA Express Loan is a good alternative to this program.

Export Express

This program is for exporters looking for a streamlined method to obtain SBA-backed financing for loans up to $500,000. You’ll get an answer on approval in 24 hours.

Export Working Capital

Export Working Capital loans, going up to $5 million, are for short-term loans for export businesses.

Veterans Advantage

VA SBA Loans of up to $350,000 for veteran-owned businesses. These loans come with reduced fees on financing.

CAPLines

The SBA’s line of credit programs designed to provide working capital and cash flow solutions for small business owners.