SBA 7(a) loans guide everything you need to know.

Finding the right financial option for your business gonna be tough. One of the best funding options is SBA, a 7(a) loan they offer flexible terms, low interest, and no penalty for paying it earlier. 7(a) loans are great for multiple purposes, such as working capital or cash loans, equipment financing, acquisition of commercial real estate, and debt refinancing. This short blog, will walk you through each step of the 7(a) loan process from determining your eligibility to getting funded.

What is an SBA 7a loan? 

A 7(a) loan is a government-backed loan designed to assist small businesses get financing. These loans are provided by SBA approved lenders and come with a partial guarantee from the government through the Small Business Administration which reduces risk for the lenders and makes it easier for small businesses to qualify.

The benefits of an SBA 7a loan, it comes with a low interest typically lower than conventional loans. They have a long repayment term of 10 years up to 25 years for commercial real estate, are used for multiple purposes, and have no pre-payment penalty. 

Assessing eligibility

There are many lenders with multiple qualification criteria, the majority of them want to see 2 years in business, they will look at your taxes for the last 2 years, your credit score must be over 680-700, and your business credit score must be over 175 and be a for-profit business in the USA. 

Preparing your application 

First, you'll need your financial information such as profit and loss statement, balance sheets, debt schedule, and tax returns for the last 3 years business and personal. In order to have a better experience, make sure you have your legal documents such as business licenses, articles of incorporation, and leases available and ensure information is correct and up-to-date. 

Choosing the right lender. 

Finding the right lender it's very important, because every lender is different, and you have to talk with a couple of them to better understand which option is the best, you can use SBA ’s Lender Match tool or contact us, we have a network of lenders that are able to fund any type of loan available or SBA, and the bet part that we had done business with that lender and we have the inside information of what working and what’s the best option for your business. 

Completing the application 

Once you decide which lender you want to use, it's time to submit the application. You'll need to complete the form 1919 and have your updated financials and tax ready for submission. Industry standards, and depending on loan complexity, you will get a pre-approval in about 5 to 7 business days however, because of our experience and our relationships with many lenders we are able to get this pre-approval in 2-3 days. 

Underwriting process

After pre-approval you will receive a list of questions and an additional list of documents to submit in order to start the full underwriting process, this process takes 2 to 4 weeks, and during the process, you may receive multiple questions regarding your business from the lender. After the underwriting process is completed, you will receive the commitment letter which will move your file into closing. 

P.S. For loans under $150,000 funding could take 2-3 weeks from start to finish. 

Closing and Funding 

After approval, it takes about two weeks to close the loan and get funded. If you're working with US Business Funding, please make sure to address any questions you have during the application process. Congratulations your wire is out )

After funding make sure you understand our payment schedule, make sure to make the payments on time, and inform the lender of any issues. 

Pros and Cons

Advantages of SBA loans are that they have low interest and extended repayment, flexible use for multiple purposes, and have government support Cons are that they are time-consuming because the application process can be slow and with a lot of questions. Also, these loans have strict eligibility criteria to meet the loan.

Conclusion 

SBA 7(a) are valuable funding options for small businesses, by following the information on this blog you can have a better understanding and prepare yourself for obtaining funding in order to grow your business. With proper preparation, working with the right ladder, and a solid understanding of the requirements you can access this great funding option for your business for long-term prosperity.