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Mortgage Training and Education Licensing: SBA Loans
7(a) loans
SBA’s most common loan program, which includes financial help for businesses with special requirements.
Content
- What is a 7(a) loan?
- Am I eligible?
- How do I use the 7(a) loan?
- What do I need to apply?
- How do I pay back my 7(a) loan?
- Existing borrowers
What is a 7(a) loan?
The 7(a) Loan Program, SBA’s most common loan program, includes financial help for small businesses with special requirements. This is a good option when real estate is part of a business purchase, but it can also be used for:
- Short- and long-term working capital
- Refinancing current business debt
- Purchasing and installation of machinery and equipment
- Purchasing furniture, fixtures, and supplies
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. Your lender will help you figure out which type of loan is best suited for your needs.
Am I eligible?
To be eligible for 7(a) loan assistance, businesses must:
- Operate for profit
- Be considered a small business, as defined by SBA
- Be engaged in, or propose to do business in, the United States or its possessions
- Be able to demonstrate a need for a loan
- Use the funds for a sound business purpose
- Not be delinquent on any existing debt obligations to the U.S. government
- Be creditworthy and reasonably assure repayment of the loan
Some businesses may not qualify for a 7(a) loan. Read more about Terms, conditions, and eligibility.
How do I use the 7(a) loan?
Basic uses for the 7(a) loan include:
- Long- and short-term working capital
- Revolving funds based on the value of existing inventory and receivables
- The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
- The purchase of real estate, including land and buildings
- The construction a new building or renovation an existing building
- Establishing a new business or assisting in the acquisition, operation or expansion of an existing business
- Refinancing existing business debt, under certain conditions
What do I need to apply?
The contents of the loan application generally vary depending on the size of the loan and the lender’s processing method. When you’re ready to apply, begin the process by working with your lender to determine which documents they will require you to provide.
The loan application documents required will generally include SBA Form 1919, Borrower’s Information Form. Use the following checklist to ensure you are prepared if your lender asks you for any of the following information:
- Borrower information form (required): Complete SBA Form 1919 and submit it to an SBA-participating lender.
- Financial statements (as applicable): The lender may require personal financial statements for the applicant(s) or owner(s) of the applicant.
- Business financial statements (as applicable): Submit the following to help show your ability to repay a loan:
- Profit and loss statement – Current within 180 days of your application. Also include supplementary schedules from the last three fiscal years.
- Projected financial statements – Include a detailed, one-year projection of income and finances and explain how you expect to achieve this projection.
- Ownership and affiliations: Provide a list of names and addresses of any subsidiaries and affiliates.
- Business license or certificate (as applicable): Provide a copy of the original business license or certificate of doing business. If your small business is a corporation, stamp your corporate seal on the SBA loan application form.
- Loan application history (as applicable): Include records of any loans you may have applied for in the past.
- Income tax returns (required for the lender to verify applicant’s size): Include signed business federal income tax returns of your business for the previous three years.
- Resumes (as applicable): Include personal resumes for each principal.
- Business overview and history (as applicable): Provide a history of the business and its challenges. Include an explanation of why you need the SBA loan and how it will help your business.
- Business lease (as applicable): Include a copy of your business lease, or a note from your landlord, with the terms of the proposed lease.
If you are buying an existing business, gather the following information (required):
- Current balance sheet and profit and loss statement of the business being acquired
- Federal income tax returns for the previous three years of the business being acquired
- Proposed bill of sale/purchase agreement, including the terms of sale
- Asking price with schedule of inventory, machinery and equipment, and furniture and fixtures
You may be required to submit more SBA forms based on the specific use of proceeds or fees paid on a loans package or to a broker or agent.
How do I pay back my 7(a) loan?
Loan repayment terms vary according to several factors.
- Most 7(a) term loans are repaid with monthly payments of principal and interest from the cash flow of the business
- Payments stay the same for fixed-rate loans because the interest rate is constant
- For variable rate loans, the lender may require a different payment amount when the interest rate changes
sba.gov
7(a) loans | U.S. Small Business Administration
7(a) loans | U.S. Small Business Administration
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1 Reply
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Overview of SBA 7 (a) Loan Program
The SBA 7(a) Loan Program is the most common loan program offered by the Small Business Administration. It is designed to provide financial assistance to small businesses and is versatile.
What is a SBA 7(a) Loan? The SBA 7(a) credit facility may be used for:
- Real Estate Purchase: This comprises lands and buildings.
- Working Capital: Short-term and long-term working capital needs.
- Debt Refinancing: Conditions apply.
- Equipment Purchase: Includes machinery, equipment, and supplies necessary for operation.
- Business Acquisition or Expansion: This means starting a new business or expanding an old one.
- Maximum Loan Amount: $5 million.
Eligibility Criteria: For a business to qualify for the 7 (a) loan, it must:
- Be profit-oriented.
- Be classified as a small business according to the SBA size standards,
- Be located in the U.S.A. or its territories,
- Show why it needs the loan,
Use the funds appropriately for business gainful purposes,
Have no defaults on any previous federal debts of the U.S. government.
Demonstrate good creditworthiness, indicating the ability to repay the borrowed money from other lenders.
How to Use a 7(a) Loan
Typical uses include:
Working Capital: Long-term and short-term requirements.
Inventory and Receivables: Revolving funds depend on existing inventory and accounts receivable value.
Equipment and Supplies: Machinery, furniture, fixtures, supplies, or materials acquisitions/.
Real Estate: Purchasing land or buildings or remaking facilities already in use.
Business Establishment or Expansion: Opening new business locations or helping buy, operate, renovate, or expand an old business.
Debt Refinancing: Replacing existing debt under certain conditions related to improving cash flow in the company’s operations.
Application Requirements
A typical application package consists of:
SBA Form 1919: Borrower Information Form.
Financial Statements:
- ·Personal financial statements for each owner.
- Business Financial Statements (Profit and Loss Statement, Projected Financial Statement)
Ownership and Affiliations: Subsidiaries or affiliates information.
Business Licenses and Certifications: Original or certified copies.
Loan Application History: Proof of completed applications for other loans
Tax Returns: Three years of signed federal income tax returns for the business.
Resumes: For the key owners in the business,
Business Overview and History: Why you are asking for this loan and how it will benefit your company,
Business Lease: A copy of the lease or a note with terms from the landlord.
Additional Documents for Business Acquisition:
- Balance sheet and profit/loss statement for the current year to date of the company being purchased.
- Federal income tax returns for the last three years on the business being acquired.
- Proposed bill of sale or purchase agreement.
- Schedule of inventory, machinery, equipment, furniture, fixtures Loan Repayment.
Repayment terms depend upon:
Loan Amount and Purpose: Most 7(a) loans require monthly principal and interest payments.
Interest Rate: Fixed-rate loans have consistent payments, while variable-rate loans may have varying payments as interest rates change.
Additional Information & Support
Borrowers with existing debt can get help repaying their debt from their lenders. In contrast, others need assistance in the application process to ensure they choose the type of loan that suits them most. Visit the SBA’s official website, where detailed information about the SBA 7(a) Loan Program is available.
https://lendingnetwork.org/express-sba-no-doc-loans/
lendingnetwork.org
This guide will cover Express SBA No-Doc Loans for small business owners. If you are a small business owner looking for a quick and simple way to get funding
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