7(a) loans (2024)

FAQs

Are SBA 7A loans hard to get? ›

While there's no official required SBA loan minimum credit score from the Small Business Administration, lenders will often set minimum credit score requirements for both personal and business. An SBSS of 140 to 160+ or a personal score of 620 to 640+ are commonly needed to qualify.

The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates.

SBA 7(a) loans are getting smaller: Since the end of the U.S. Small Business Administration's 2022 fiscal year, the average loan size in its flagship program has dropped more than six figures. The addition of three new nondepository lenders could further drive down this figure.

For most 7(a) loan programs, SBA guarantees up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. However, SBA provides a 50% guaranty on SBA Express loans.

The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.

The SBA requires borrowers to make a 10% down payment on 7(a) loans for startup businesses and business acquisitions. For 7(a) loans used for other purposes, the individual lender may require equity if they do so for their other similar (non-SBA) loans.

Thanks to the wide range of permitted loan uses, an SBA Express loan is financing that's easy to approve and is likely perfect for your startup's needs.

Terms range from 10 to 25 years and the length of your term will determine if you have a prepayment penalty. For SBA 7(a) loans with a term of less than 15 years, there's no prepayment penalty. For SBA 7(a) loan has a term of 15 years or more, you may have an SBA prepayment penalty.

Will SBA 7a loans be forgiven? ›

Business owners defaulting on their SBA loan can apply for loan forgiveness, but that does not guarantee the SBA will approve the request. It is more commonly referred to as an "offer in compromise". The SBA evaluates your case and discusses the matter with the lender.

7(a) Small loans exclude: Standard 7(a) loans, SBA Express, Export Express, CAPLines, Export Working Capital Program (EWCP), and Pilot Program loans. For loans $50,000 or less: SBA does not require collateral, except for International Trade loans, which have different requirements.

SBA 7(a) loan terms

The maximum term lengths for SBA 7(a) loans typically depend on the use of loan proceeds: 25 years for real estate. 10 years for equipment. 10 years for working capital or inventory loans.

Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.

On average, most SBA loans take 30 to 90 days from applying to funding. 7(a) loan subtypes are backed directly by the SBA. The SBA's turnaround time is 2 to 10 business days, but approval from your chosen lender can take 30 to 60 days. Microloans are loans for smaller amounts of $50,000 or less.

Many statistics say that large banks approve SBA loans at rates as low as 20-30%, while smaller banks approve SBA loans at around 40% or less.