SBA 7(a)
If you are awarded a 7(a) loan, the loan proceeds may be used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business.
Below is some of the Loan Criteria for an SBA 7(a) loan – it is not all inclusive.
Loan Amount:
$250,000 to $5,000,000
Time to Close:
Closing times normally average 45-60 days from signed LOI or Commitment Letter.
Loan to Value:
Up to 90% on new purchases
Up to 80% on refinances
Some speciality properties may be less on a case by case basis
Up to 100% on medical offices
Interest Rates:
Interest Rates on SBA Loans are very competitive. For the most part they are quarterly adjustable loans based on the prime rate plus a margin. In some instances a fixed rate may be available.
Terms:
SBA Loans allow for terms of up to 25 years based on the loan purpose. These are fully amortizing loans with no balloons or calls.
Prepayment Penalty:
Typical prepayment penalty on an SBA Loan is a declining penalty over a 3 year period (5%,3%,1%). Fixed Rate Loans may carry different prepayment penalties.
Fees:
Alliance Business Capital typically charges a 1% Commercial Loan Fee that is paid at closing and a processing fee that is due upon loan entering into processing.
The SBA has a loan guarantee fee that is based on loan size but typically runs in the 2% – 2.5% range. This fee may be financeable.
A good faith deposit will also be required to cover third party reports.
Additional costs for legal fees and closing will also be applicable.
Collateral:
First lien on assets being financed
Recourse:
Personal guarantees for all individuals owning 20% of more of the Business. Corporate guarantees of affiliated companies may be required.
Debt Service Requirements:
Minimum of 1.25% (exceptions on a case by case basis down to 1.15%)
Industries:
All for-profit business that meet SBA eligibility requirements.
Eligible Use of 7(a) Loan Proceeds Include (Non-Exclusive):
- The purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities
- The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
- Long-term working capital, including the payment of accounts payable and/or the purchase of inventory
- Short-term working capital needs, including seasonal financing, contract performance, construction financing and export production
- Financing against existing inventory and receivable under special conditions
- The refinancing of existing business indebtedness that is not already structured with reasonable terms and conditions
- To purchase an existing business
SBA loans cannot be used for these purposes:
- To refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing
- To effect a partial change of business ownership or a change that will not benefit the business
- To permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business’s continuance until the loan supported by SBA is disbursed
- To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow
- For a non-sound business purpose
If you are unsure whether or not your anticipated use of funds is allowed, check with your Alliance Representative.
Please feel free to Contact Us or fill our our Quick App.
An Alliance Representative will contact you in most cases the same or next Business Day regarding your inquiry.
PDF