SBA 7(a) Loan Program Primer

The SBA 7(a) loan program is the SBA’s primary program for providing start-up and existing small businesses access to capital. SBA 7(a) loans are issued by commercial lenders, and are guaranteed by on average 75% by the SBA. The program is very flexible in terms of business model and use of proceeds, depending upon the 7(a) program through which the applicant is funded. The applicant must be able to demonstrate through a business plan, financial history, or other documentation that the loan’s primary source of repayment is the company’s own cash flow. The applicant must receive approval from the commercial lender and the SBA for funding.

There are four major SBA 7(a) loan programs:

1. SBA 7(a) Express Program
The Express Program is for applicants seeking immediate funding. On average there is a 36 hour turnaround for loan review by the SBA, and a 50% guarantee is available for loans up to $350,000. The maximum interest rate for loans greater than $50,000 is Prime + 4.5%, and Prime + 6.5% for loans less than $50,000.

2. Export Loan Program
The Export Loan Program is in place to serve a difficult niche for commercial lenders as it relates to companies that export goods and services. Typically, commercial lenders are hesitant to lend against foreign purchase orders, receivables, or inventory that is offshore.

The Export Loan Program has many intricacies through its three variants: the Exporters Express (loans and lines of credit up to $250,000), the Export Working Capital Program (loans and lines of credit up to $2,000,000), and the International Trade Loan Program (up to $1,750,000). These programs provide up to 90% guarantees with various uses of funds relating to exporting goods and services.

3. Rural Lender Advantage Program
For companies in SBA-designated rural districts, guarantees of up to 85% on loans of $350,000 or less are available. The purpose of the program is to mitigate lending risks to commercial lenders related to rural businesses.

4. Special Purpose Loans
SBA offers several special purpose 7(a) loans to aid businesses that have been impacted by NAFTA, to provide financial assistance to Employee Stock Ownership Plans, and to help implement pollution control mechanisms.