Guide to Getting an SBA 7(a) Loan


While searching for loans and financial backup for your small business, SBA 7(a) loans can be the ultimate destination for you. Often startups and small business owners face challenging times during their initial stages of business growth and development. In such scenarios, the SBA 7(a) loan program is the right choice!

The SBA loans are quite appealing for entrepreneurs, who can use the money right away to finance their core business operations. SBA 7(a) loan borrowers can utilize the amount for literally anything, starting from buying new machinery, hiring staff, upgrading the office space, or even clearing any outstanding debts.

When all other financing institutions and lenders close their doors, the SBA 7(a) loan program has got you covered. Due to budget constraints, entrepreneurs often don’t get access to enough resources to grow and expand their company. To help you fulfill your business goals, we will be guiding you throughout the process of getting SBA 7(a) loans.

What is an SBA 7(a) Loan?

The U.S. Small Business Administration (SBA) is a federal agency that offers small business owners and entrepreneurs access to working capital for carrying out their business processes. However, the SBA does not lend money directly. Instead, it guarantees a specific amount by using federal money up to 85% of the loan amount given by financial institutions and other lenders.

SBA 7a loans ensure less risk for the lenders who usually don’t readily approve loan applications of small business owners and budding entrepreneurs. By offering a guarantee amount, SBA allows startups and small businesses to grow and prosper.

You can use this capital for a number of purposes, like –

  • Establishing working capital
  • Purchasing machinery and equipment
  • Refinancing debts
  • Upgrading the office space
  • Buying land
  • Expanding your business

Eligibility Criteria and Requirements for Getting SBA 7(a) Loans

You need to meet the following criteria to get approved for SBA 7(a) loans –

  • You must have an official registration as a for-profit business. That means, you must be operating your business legally.
  • You must have an employee strength of 500 and an average annual revenue of $7.5 million for the last 3 years.
  • You cannot be on parole if you are the business owner.
  • You must prove that you are investing your time and money effectively into your business.
  • The net income of your business must be less than $5 million. Your tangible net worth should be under $15 million.
  • You must be doing business within the territories of the United States.
  • Your small business or startup must be an SBA-enabled industry.
  • You must show that you have a valid business motto and purpose.
  • You must prove that your intended business capital usage is SBA-approved.
  • You must show that you have tried and failed to get loans from other lenders or financial institutions.
  • You must prove that you are willing to clear all your existing debts that are due to the US government, such as taxes or student loans.

Some of the additional business qualities and requirements of getting SBA 7(a) loans include –

  • You must have a credit score of over 680.
  • You must not have a history of recent bankruptcies, tax liens, or foreclosures.
  • You should be able to offer collateral for any loan requests above $25,000.
  • You must be doing business for a minimum of 2 years.
  • You must be able to make a 10% down payment if you wish to use the funds for purchasing commercial real estate or any business equipment.
  • You must have enough cash flow to fulfill your debt obligations.
  • You must have a ‘good character’ as per the SBA standards, which is decided based on how well you manage your day-to-day business operations and use your resources.
  • You have enough working capital, that is the amount you get after subtracting liabilities from your assets.

Tips to Choose the Right SBA 7(a) Loan

Before you apply for any particular loan program, keep in mind the following things –

  • Do your homework

There are multiple SBA 7(a) loan options that come with different features and benefits. You need to do a thorough research of each of the available ones and compare and contrast each of them to pick the best one. Learn about the interest rates, loan rates, loan fees, term lengths, and loan requirements before applying.

Some of the most popular SBA 7(a) loans are –

  1. Standard 7(a) Loan
  2. SBA 7(a) Small Loan
  3. Export Express Loan
  4. SBA Express Loan
  5. International Trade Loans
  6. Export Working Capital
  7. SBA CAPLines
  • Study your options

Before making any borrowing decisions, you need to determine your business requirements and what is your current financial situation. Different loans are designed to cater to different financial needs. Determine how you are going to use the loan money. It will enable you to choose the right business loan scheme that will benefit you the most and meet your specific business needs efficiently.

Remember the 3 Cs of business lending –

  1. Credit – it refers to your track record and history of whether you have paid your debts on time in the past.
  2. Cash flow – it means to measure the financial health of your company.
  3. Collateral – it refers to the assets available to clear off your loan debts.
  • Know the amount you need

You cannot just borrow any amount of money. You need prior planning as to why you are taking the loan and how you are going to spend the money. You need to figure out why you need the money and what are the new changes you wish to implement or the purpose you want to fulfill. Having a specific focus, you can understand which SBA loan option would be best for your business requirements.

  • Improve your credit score

Nobody would be ready to lend you money if you don’t have a good credit history and score. As mentioned earlier, you would need to have a credit score of 680 in order to get approvals from the SBA.

So, make sure to clear off your debts on time. The higher the credit score, the greater will be the chances of getting SBA approvals and the benefits received.