Are you looking for the ideal financing option to help your business grow? An SBA 7a loan may be the right choice for you. Learn more about what this type of loan entails, and find out if you meet the eligibility criteria.
What is an SBA 7a Loan?
An SBA 7a loan is a government-guaranteed loan program that allows small businesses to access up to $5 million in funding. It’s available through the Small Business Administration (SBA). The loan supports businesses in purchasing items such as machinery and equipment, as well as covering working capital needs. To qualify, businesses must meet the SBA’s guidelines for size, credit history, and type of business.
Qualifying for an SBA 7a Loan
To qualify for an SBA 7a loan, businesses must meet the SBA’s size requirements. Generally, businesses must be considered ‘small’ by the SBA in order to qualify. The criteria is based on industry standards and varies by business type; for example, a ‘small’ manufacturer may have up to 1500 employees whereas a ‘small’ retail store must have 500 or fewer employees. Additionally, the applicant must also demonstrate good credit history. The business owner is typically required to submit documentation regarding their personal credit history; certain types of debt are disqualifying factors. Finally, businesses that apply must be operating as viable companies with consistent revenue streams and the ability to repay a loan.
Eligibility Requirements for an SBA 7a Loan
To be eligible for an SBA 7a loan, businesses must meet the SBA’s size requirements, demonstrate good credit history, and prove they are operating as viable companies with consistent revenue streams. First, businesses must be considered ‘small’ by the SBA in order to qualify; criteria varies by business type. Then, applicants must submit documentation of their personal credit history; certain types of debt are disqualifying factors. Finally, the business owner must provide evidence that their company has a predictable revenue stream and is capable of repaying a loan.
Application process for an SBA 7a Loan
The process of being approved for an SBA 7a loan consists of selecting an appropriate lender, completing the loan application, providing the required documentation, and passing any additional underwriting requirements. First, businesses are encouraged to research their lenders and compare rates and terms. After finding a suitable lender, applicants must complete a full loan application and provide necessary personal financial data such as tax returns. Applicants must also be prepared to submit business documents such as profit/loss statements and balance sheets that demonstrate the health of their enterprise.
Challenges and Alternatives to Obtaining an SBA 7a Loan
Receiving an SBA 7a loan can be challenging as it requires a number of documents, fees and eligibility requirements. Lenders use these criteria to assess the creditworthiness of borrowers and determine whether the business has sufficient resources to repay the loan on time. If you do not meet all of the criteria necessary for an SBA 7a loan, there are other alternatives to fund your business. Consider applying for an online loan, a grant, or explore crowdfunding options as viable funding paths for your business.