SBA 7(a)

 South Central Kansas Economic Development District, Inc. (SCKEDD) packages SBA guaranteed loans for banks and other lenders.

 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 though normal lending channels. 

 Eligibility

• A business is usually eligible if

  • The purpose of the loan is to start or grow a business;

  • The existing business employs not more than 500 people; has average annual sales for the preceding three years not exceeding $6 million, including business affiliates; the business and its owners have good credit; and the business owners are of good character.

• Owner equity contribution is important.

 Projects Financed

• 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.  Rate cannot exceed 2 ¾ % over minimum Wall Street Journal prime as of the date application was received on a loan of 7 years or longer.  On a loan of less than 7 years, maximum would be a 2 ¼ % 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:

o        Loans between $25,000 and $50,000 can be 1% higher than the limits shown above.

o        Loans less than $25,000 can be 2% higher than the limits shown above.

Fees

• Guaranty Fee - Lender may pass this fee on to the borrower by either direct billing or in 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. 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.  And, an additional .25% 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 –

  • $1,000. upfront fee for all projects.                                                          

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, and generally 7 years for working capital.

• There is a prepayment penalty for loans with maturities for loans with maturities for loans with maturities > 15 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.

Download the loan application here.  Or fill out the application on-line at www.kacdc.com.

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

For More Information Contact:

SCKEDD
316-262-7035
200 W. Douglas, Suite 710
Wichita, Kansas 67202