SBA 7a Loans

Allowable Uses for 7(a) Loan Proceeds

Nearly any justifiable business purpose is eligible for 7(a) Multi-Purpose loan funds, including:

• Working capital – Inventory, payroll, rent, utilities, supplies
• Equipment purchases – Machinery, vehicles, hardware, software
• Business expansion – Adding locations, entering new markets
• Real estate – Purchase, construction, renovations, improvements
• Debt refinancing – Lower interest rates or monthly payments
• Business acquisition – Buying an existing business
• Partner buyouts – Purchasing a partner’s ownership stake
• Professional services – Engineers, consultants, architects
• Marketing – Advertising, branding, website development
• Commercial leasehold improvements – Tenant renovations

7(a) funds can be used for any sound business operational expenses, renovations, or purchases to promote financial health and growth. This versatility makes 7(a) loans an ideal solution for small business financing needs of any size.

What is a 7(a) Multi-Purpose Loan?

The 7(a) Multi-Purpose loan is the most flexible 7(a) product. These loans provide up to $5 million in long-term business financing that can be used for nearly any sound business purpose – ideal for starting or expanding a small business.

The Small Business Administration guarantees a portion of 7(a) loans, encouraging lenders to approve financing they may otherwise consider too risky. This government backing makes capital accessible for business owners who do not qualify for traditional loans.

While specialized Small Business Administration loans like 504s are strictly for commercial real estate, the Multi-Purpose 7(a) is designed for general operational financing needs. If you need funding to grow your business, a 7(a) loan can help make your vision a reality.

While the maximum 7(a) loan amount is $5 million, loan sizes typically range from $50,000 to several million based on each business’s specific capital requirements and financial qualifications.

Small businesses needing loans less than $500,000 can qualify for expedited SBA Express approval. But for loans above that threshold, the standard 7(a) process applies for maximum loan amounts up to $5 million.

The extended repayment terms of up to 25 years for real estate and equipment financing are substantially longer than conventional small business loan terms from banks. This leads to more affordable and manageable monthly payments that fit small business cash flow constraints.

And with 7(a) small business loans, there are no costly prepayment penalties or balloon payments. Borrowers can pay off the remaining principal early with no extra fees.

Documents Required for a 7(a) Loan Application

Documents commonly required from borrowers for SBA 7(a) Multi-Purpose loan underwriting include:

• Loan application – Detailed personal and business information.
• Business plan – In-depth description of your company and strategic vision.
• Three years of complete business and individual tax returns – To verify financial history.
• Current personal financial statement – Outlining all assets, liabilities, and net worth.
• Resumes of all owners and key employees – Highlighting management expertise.
• Three years of business financial statements – Historical income statements, balance sheets.
• Financial projections – 2-year revenue forecasts, expenses, profit and loss statements, and cash flow.
• Collateral details – Full lists of real estate, equipment, inventory, and other business assets.
• Additional eligibility information – Business licenses, EIN, SSNs, formation documents.

Thorough preparation and completeness with all loan requirements help streamline SBA approval. It demonstrates both creditworthiness and program eligibility.

Difficulty Getting Approved for a 7(a) Loan

Approving a 7(a) Multi-Purpose loan requires moderately tricky qualifications. The main factors lenders evaluate include:

• Your personal credit score – a 675 FICO score or higher gives the best approval odds
• Your business financials – Steady historical revenue, profits, and operating cash flow improve chances
• Your equity injection into the project – 20-30% or more of total project costs is ideal
• Your management experience – A proven leadership track record provides confidence
• Meeting all SBA eligibility requirements – Documentation is key

It’s certainly not easy money, but a robust application can help business owners overcome obstacles like lack of extensive credit history or conventional collateral. Preparing thoroughly and working with an experienced SBA lender, like a Preferred Lender, maximizes your chances of approval. Their expertise can guide you through the process.