SBA 7(a)

The 7(a) Loan Guaranty Program is one of SBA’s primary lending programs. It provides loans to small businesses unable to secure financing on reasonable terms through normal lending channels.

SBA 7(a) Loan Application

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Eligibility

Your business could be eligible if:

  • The purpose of the loan is to start or grow a business.
  • The existing business employs 500 people or less.
  • The existing business experiences average annual sales for the preceding three years not exceeding $6 million, including business affiliates.
  • The business and its owners have good credit.
  • The business owners are of good character.

**Owner equity contribution is also an important contributing factor.

Projects Financed

Characteristics of projects which have received financing include:

  • Financing is available for most business needs; however, restructuring of existing debt must meet SBA requirements.

Loan Amount & Guaranty

  • Gross Loan Amount of $2,000,000 with the maximum guaranty of $1,500,000.
  • The maximum SBA guaranty on a loan up to an amount of $150,000 is 85%.
  • For loans above $150,000, the maximum SBA guaranty is 75%.

Interest Rate

  • Fixed or variable.
  • On a loan of seven (7) years or longer, the rate cannot exceed 2-3/4 % over minimum Wall Street Journal prime, or SBA optional peg rate, as of the date the application was received.
  • On a loan of less than seven (7) years, maximum rate would be 2-1/4 % over minimum Wall Street Journal prime.
  • If variable, rate fluctuations may be monthly, quarterly, semi-annually, annually, etc. on the first calendar day of the month.
  • If loan is up to $50,000 there are exceptions to the above limits on interest rate:
  • Loans between $25,000 and $50,000 can be 1% higher than the limits shown above.
  • Loans less than $25,000 can be 2% higher than the limits shown above.

Fees

  • Guaranty Fee – The lender may pass this fee on to the borrower by either direct billing or through the loan proceeds.

Term of loan over one year:

  • If the total loan amount is < or = to $150,000, the one time fee is 2% of the guaranteed amount. The lender can retain 25% of this fee.
  • If the total loan amount is > $150,000 up to $700,000, the one time fee is 3% of the guaranteed amount.
  • If the total loan amount is > $700,000, the one time fee is 3.5% of the guaranteed amount. There is an additional .25% fee for any guaranty that exceeds $1,000,000.

Term of loan less than 12 months:

  • One time fee is one quarter of one percent (1/4 of 1%) of the guaranteed portion of the loan.
  • Other Fee: The lender pays a .545% per annum fee on the outstanding guaranteed balance of each loan approved. The fee is paid monthly with the 1502 reporting form. The fee can only be passed on to the borrower through the interest rate and not directly billed.

SCKEDD Packaging Fee

  • Fee for Loan Packaging varies by size of loan and complexity of the project. Please call us to discuss your proposal.

Repayment

  • Loan maturities are based on the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed.
  • Maximum loan maturities: 25 years for real estate and equipment tied to useful life, furniture and fixtures (F&F), and machinery and and up to ten (10) years for working capital.
  • There’s a prepayment penalty for loans with maturities of 15 years or more and if repaid in first three years.

Collateral

  • To secure the loan, the borrower must pledge available business and personally owned assets. Loans are not declined when inadequate collateral is the only unfavorable factor.
  • All owners of 20 percent or more are required to personally guarantee the loan.

Please note that above information was gathered from SBA publications and websites. Terms and conditions are subject to change.


For more information, contact us

Christie Henry, Lending Program Manager
E-mail: christie@sckedd.org
316-262-7035
9730 E. 50th Street N.
Bel Aire, Kansas 67226