7(a) Small Loans and Standard 7(a)—What You Need to Know

SBA loans are one of the most competitive financing options available to small business owners and for good reason. With high lending amounts, low-interest rates, flexible use, and generous payment terms, these loans are hard to beat—especially for businesses who struggle to qualify for even a traditional bank loan.

Despite confusion around the term “SBA loan,” the U.S. Small Business Administration (SBA) doesn’t actually foot the cash. Rather, it screens businesses through strict eligibility requirements and then guarantees a portion of the loans. Since the SBA is eating most of the risk, banks and alternative lenders are eager to win your business by offering flexible terms and competitive interest rates.

The SBA offers a number of different loan options, but none is more popular than the SBA 7(a) Loan Program. SBA 7(a) loans pack the powerful financial punch your business needs to tackle just about any business need.

First, let’s dive into the nitty-gritty of SBA 7(a) loans, then we’ll help you distinguish and choose between the Standard 7(a) and 7(a) Small Loan.

SBA 7(a) loan overview

SBA 7(a) loans offer some fantastic advantages over other traditional business loans, but the application process can be a bit more intensive. Thanks to the SBA’s guarantee, businesses classified as “riskier” borrowers can score the financing they need.

Here’s what you can expect from an SBA (7a) loan:

Details:

• Maximum loan amount: Up to $5 million
• Interest rate: 6% to 8% (dependent on U.S. Prime Rate)
• Repayment terms: As long as 25 years
• Maximum SBA guarantee: 85% for loans up to $150,000. 75% for loans above $150,000
• Collateral: SBA 7(a) loans less than $25,000 don’t require collateral, but if a loan exceeds $350,000, the SBA requires the lender to demand the maximum amount of collateral to reduce risk
• Loan purposes:
  • Purchase land
  • Buy or expand an existing business
  • Refinance debt
  • Buy equipment, supplies, or materials
  • Funding startup costs
  • Seasonal line of credit
  • Working capital

Pros of an SBA 7(a) loan:

• Businesses who struggle to qualify for traditional loans (underserved communities, minority-owned businesses, women-owned businesses) can get federal backing
• Huge loan amounts to cover just about any small business expenses
• Flexible loan purposes to spend on a variety of small business initiatives
• Competitive interest rates
• Generous repayment terms
• Low down payments

Cons of an SBA 7(a) loan:

• Intensive paperwork and processing is required (however, we can help simplify the process)
• Must be in business for more than 3 years to qualify with at least $400,000 in annual revenue
• Good credit (above 680) is usually required
• Collateral may be required if you’re looking for a substantial loan amount

Standard 7(a) Vs. 7(a) Small Loan

There’s not a whole lot of differences between the Standard 7(a) and the 7(a) Small Loan. The Standard 7(a) loan is typically what businesses and lenders are talking about when they say SBA loan. 

The SBA 7(a) Small Loan is essentially the same as the Standard 7(a), just smaller. It comes with similar rates, terms, and maximum guarantees, but it’s capped at a maximum loan amount of $350,000. Since 7(a) Small Loans are substantially smaller and may be best for working capital rather than business expansion.  

Unlike the Standard 7(a), the SBA pre-screens 7(a) Small Loan applicants to determine if you’re a quick and easy approval. The SBA will look at your personal credit, business credit, borrower financials, and your application to evaluate your creditworthiness. If you pass the pre-screening, you’ll get put into the SBA’s E-Tran system—which is the fast lane to getting an SBA 7(a) loan. If you fail, however, you’ll have to go through the more intensive Standard 7(a) Loan process.

Apply for Your SBA 7(a) Loan Through Funding Circle

Businesses come in all shapes and sizes, and that’s why we take a personalized approach to getting you an SBA 7(a) Loan. Whether you’re after a Standard 7(a) or 7(a) Small Loan, our application process can streamline your processing to get you quick answers and fast closings.

One of our dedicated account managers will walk you through the process from start to finish, ensuring you spend more time running your business and less time sifting through mountains of paperwork. We work with Preferred SBA Lenders who help accelerate the entire process.

By working with us, you can enjoy all the sweet benefits of an SBA 7(a) loan without all the aggravating complexities. If you want to learn more about our SBA Loan application process, learn more here. And if you’re ready to get started, go ahead and begin your application now.

asdfad