SBA 7a Loan for Commercial Property, Working Capital, Debt Consolidation & More

The Small Business Administration 7a loan is very flexible and can be used for "any legitimate business purpose" and as a result of recent legislation larger loans are available for larger businesses.

The new maximum 7a loan is $5 million and a business can have a tangible net worth of up to $15 million and net (after tax) income up to $5 million.

SBA 7a Loan Program Information and Eligible Uses

7a loans can be used for most business purposes, including:

• Refinance of Commercial Real Estate
• Construction of a New Building
• Refinance of Business Debt
• Purchase of an Existing Business
• Working Capital
• Purchase of Real Estate
• Tenant Improvements
• Equipment Financing
• Leases
• Inventory

 

Commercial Real Estate & Collateral

Loans that include real estate are easier to do at the moment since lenders are more comfortable using a commercial building as collateral.

Loans that do not include commercial real estate (like business acquisitions) or are "under collaterallized" are getting funded if the business has strong, steady cash flow...or if the owners of the business have enough outside income from other sources.

Please note: the Small Business Administration defines what can be done and they guarantee loans for lenders, but you still have to rely on a bank or an SBA approved lender to secure financing.

 

More SBA Eligibility

The new 7a loan limit of $5 million is not only a maximum loan amount, but it also serves as a maximum threshold for eligibility because the SBA uses the same figure to determine how much SBA eligibility a business owner can have.

In other words, you can have just one loan of $5 million or you can have multiple loans totaling $5 million. This is significant for those in need of additional financing to either purchase or refinance additional businesses.

If you need more than $5 million in SBA eligibility then consider the 504 loan program or the "Green 504" program. The "regular" 504 can now be used for projects in the $12 to $20 million range and the Green 504 can accomodate multiple projects using maximum financing with technically no cap on eligibilty for the same borrower/business.

SBA 7a Loan Rates

SBA 7a loan rates are typically Prime plus a margin not to exceed 2.75% and the rate you can expect to receive is typically based on the strength of your loan. Some lenders will offer attractive 3 or 5 year fixed rates that adjust after the initial fixed period.

 

SBA 7a vs. 504?

The 7a (and the 504 program) are some of the only commercial loans available for those who do not have a lot of equity or a large down payment since both can be approved with as little as 10% down or 10% equity.

The SBA 7a loan is a little easier for lenders to approve at the moment because:

• Banks and lenders can sell the loans for a higher premium (profit) on the secondary market.
  
  
• 7a loans offer a 75% guaranty from the SBA which reduces the required capital and reserves a bank needs to make a loan which, in turn, enables banks to do more lending.

The 504 loan, while an excellent low risk loan still has some risk for a lender, because the SBA guarantee only covers the SBA debenture (or second mortgage) and in the case of default the bank is on the hook for amount of the first mortgage - typically 50% of the total project cost.

 

SBA 7a Refinance

In addition to commercial real estate, the SBA 7a loan may also be your best option to refinance your current business loan. Among other things, it can be used to refinance the following types of business debt:

• Long term debt with a balloon
• Business credit card debt – as long as you can show it was used for business purposes
• Revolving lines of credit

 

Please contact us at 1-800-414-5285 if you need more information re: qualifying, eligibility under the new guidelines or timing for approval.

 

 

Alternatives to SBA Financing

Even if you meet SBA approval guidelines, there is still no guarantee that you will find financing in the current credit environment. Banks and lenders are still extremely risk averse and the reality is that some good loans are not being approved. There is an alternative however..."Asset Based Loans."

Asset Based Loans are an alternative to SBA lending where a lender secures the loan with an asset - anything from purchase orders, to accounts receivable to equipment or inventory and some programs are available for A through D credit.

If we are unable to help you with SBA financing one of these alternatives may be possible:

• Accounts Receivable Financing
• Factoring
• Equipment Financing and Leasing
• Purchase Order Financing
• Financial Contract Monetization
• Service Contract Monetization
• Medical Equipment Financing
• Merchant Credit Card Advance Lending
• Sale/Leasebacks
• Construction Project Financing
• Tenant Improvement Financing

Please remember, in most cases we do not charge a fee for assisting you with either an SBA 7a loan or an Asset Based Loan. Please contact us if you have any questions about how to qualify for either.

You can call us toll free at 1-800-414-5285