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SBA 7(a) Loan Programs
What Is A SBA 7(a) Loan And Other Frequently Asked Questions
SBA Loans are an excellent lending option to fund your commercial real estate project and/or purchase. The SBA can provide financial assistance to your business by guarantying a percentage and loan amount. Check out your options below and then contact DDA Mortgage.
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What is a SBA Standard 7(a) loan?
The 7(a) loan is the most common SBA loan and is the best option when used to purchase commercial real estate. The loan includes financial help for small businesses with special requirements.
Standard 7(a)
Maximum loan amount
$5 million
Maximum SBA guarantee %
85% for loans up to $150,000 and 75% for loans greater than $150,000
Interest rate
Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum
Eligibility decision
By the SBA. Qualified lenders may be granted delegated authority (PLP) to make eligibility determinations without SBA review.
Revolving lines of credit
Up to 10 years (Permitted only under CAPLines submission. See below)
SBA turnaround time
5-10 business days
Forms
SBA Form 1919 and SBA Form 1920 are required for every loan (other SBA Forms may be required)
Collateral
Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount. If business fixed assets do not “fully secure” the loan the lender may include trading assets (using 10% of current book value for the calculation), and must take available equity in the personal real estate (residential and investment) of the principals as collateral.
Credit decision
By the SBA. Qualified lenders may be granted delegated authority (PLP) to make credit decisions without SBA review.
*chart provided by sba.gov
7(a) Small Loan
Maximum loan amount
$350,000
Maximum SBA guarantee %
85% for loans up to $150,000 and 75% for loans greater than $150,000
Interest rate
Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum
Eligibility decision
By the SBA. Qualified lenders may be granted delegated authority (PLP) to make eligibility determinations without SBA review.
SBA turnaround time
5-10 business days
Forms
SBA Form 1919 and SBA Form 1920 are required for every loan (other SBA Forms may be required)
Collateral
Lenders are not required to take collateral for loans up to $25,000. For loans over $25,000, up to and including $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly-sized non-SBA-guaranteed commercial loans, but at a minimum the lender must take a first lien on assets financed with loan proceeds and lender must take a lien on all of the applicant’s fixed assets including real estate. Lender is not required to take a lien against applicant’s real estate when the equity is less than 25% of the fair market value. The lender may limit the lien taken against real estate to the loan amount.
Credit decision
By the SBA. Qualified lenders may be granted delegated authority (PLP) to make credit decisions without SBA review.
*chart provided by sba.gov
SBA Express
Maximum loan amount
$350,000
Maximum SBA guarantee %
50%
Interest rate
Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum
Eligibility decision
Made by the lender
Revolving lines of credit
Up to seven years with maturity extensions permitted at the outset
SBA turnaround time
Within 36 hours
Forms
Lender primarily uses own forms and procedures, plus SBA Form 1919
Collateral
Lenders are not required to take collateral for loans up to $25,000. May use their existing collateral policy for loans over $25,000 up to $350,000.
Credit decision
Made by the lender
Purchase
Lender may request expedited SBA purchase on small loans or in situations where liquidation may be delayed
*chart provided by sba.gov
What is the advantage of an SBA loan?
SBA loans are generally easier to qualify for and have better terms for small businesses who 1) don't have established business credit or 2) have less than perfect credit.
SBA Guarantee
Depending on your loan type, see charts above, the SBA guarantees a majority of the loan. The guarantee takes away the risk of default and allows banks to offer competitive interest rates and terms. Complete our preliminary form today and start the application process.
Lower Down Payment Requirements For Commercial Real Estate Loans
Again, the SBA guarantees the loan and takes way the risk of default. Banks can offer equity contributions of as little as 10% to purchase commercial property when using a 7(a) loan program. Contact us to learn more about the application process.
Longer Repayment Terms For Commercial Real Estate Loans
The best part about SBA 7(a) loans are the repayment terms. SBA allows you to pay off your loan early without penalty if your business is doing well. The SBA 7(a) loan also offers longer terms limits for more flexible financing.
What is the disadvantage of an SBA loan?
The short answer is more paperwork and a longer process.
You will be required to fill out more paperwork than a typical commercial loan. The approval process can also take longer. You may also be required to sign personal guarantees.
If you would like more information about SBA 7(a) loan options, contact us today! Or start your commercial loan application.
