SBA 7(a) loans

What is an SBA 7(a) loan?

A 7(a) loan is a term loan from a bank or approved lender, with the SBA guaranteeing 75% to 85% of the balance. The guarantee is why a lender will stretch a working capital loan to 10 years and a building loan to 25, with no balloon, when a conventional loan would be 3 to 5 years. Almost any legitimate business purpose qualifies, which is why it is the default for buying a business, opening a franchise or refinancing expensive debt.

Variants exist for exporters and for smaller loans, but the standard 7(a) is what most owners end up with.

Who qualifies for an SBA 7(a) loan?

On paper: a for profit US business within size standards, owned by people who have put their own money in and cannot get the same terms elsewhere. In practice, lenders apply their own bars, and these decide most outcomes.

• Two or more years in business, owner credit of 680 or higher, and a DSCR of 1.25 or better on the last filed return.
• For a purchase, 10% of the project cost from you, which can include a seller note on standby.
• Common declines: unpaid federal taxes, a prior default on federal debt, a recent bankruptcy, and revenue falling two years running.
• Startups can qualify with experience and 10% to 30% cash, but fewer lenders will look. See startup business loans.

What does an SBA 7(a) loan really cost?

A typical example: you borrow $500,000 over ten years at prime plus 2.75%, about 9.75% today. The payment is roughly $6,540 a month and total interest is about $285,000 over the full term. If prime rises one point, a variable payment rises by about $270 a month.

Fees come on top. The SBA guarantee fee is 0% to 3.75% of the guaranteed portion depending on loan size and the year's schedule, which on this loan could be anywhere from nothing to around $14,000, usually financed into the loan. Lenders may add packaging fees of $2,000 to $5,000, plus closing costs such as appraisals and title. See the full picture in the SBA loan calculator.

How do you qualify, and what documents do you need?

The 7(a) file is the heaviest in small business lending: three years of business and personal tax returns, interim financial statements no older than 90 days, a debt schedule, a personal financial statement for each 20% owner, formation documents and a short business plan or use of funds. Purchases add the purchase agreement, the seller's three years of returns and a valuation.

Gather everything from the document checklist before you apply; incomplete files are the main reason a 45 day loan becomes a 90 day loan. Read personal guarantees too, because every 20% owner signs one.

How long does an SBA 7(a) loan take?

Typically 30 to 90 days from a complete application to funding. A lender with preferred status can approve in house, which usually means 30 to 45 days; a lender that must send the file to the SBA adds two to four weeks. Real estate adds an appraisal and often an environmental report, and acquisitions add a valuation, each of which can take two to three weeks on its own.

If you need money faster, SBA Express trades a smaller maximum and a higher rate for a 36 hour SBA decision.

When should you choose something else?

Choose an SBA 504 loan if the purpose is a building or heavy equipment and you want a fixed rate on most of the loan; our 7(a) versus 504 comparison shows when each wins. Choose a conventional term loan if your bank will lend without the guarantee, because you skip the guarantee fee and close faster.

Choose something else entirely if you need money inside 30 days, your credit is under 650, or your last return shows a loss. Those files are declined far more often than approved, and the two months of effort is real.

How do you apply for an SBA 7(a) loan?

Apply once on this site and your application reaches SBA 7(a) lenders that fit your industry and loan size, plus conventional lenders that might be faster, so you can compare. It is free for your business, and we are paid the same whichever lender you choose. If you would rather not assemble the file by hand, ask your AI assistant to apply through our MCP server: it reads your returns and statements, completes the application and submits it, and offers come back to one place.