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You’re not alone. Many small businesses come upon money problems as they struggle to survive in this competitive economy. Perhaps you have cash flow problems, want to refinance business debt, or buy real estate, but you aren’t sure where to turn. 

That is exactly what SBA 7(a) loans are for! In this article, we will answer the question “What is an SBA 7(a) loan?”, explore various SBA loan programs, and explain how to apply for an SBA 7(a) loan.

SMALL BUSINESS ADMINISTRATION sign emblem seal at headquarters building entrance

What is an SBA 7(a) Loan?

The SBA 7(a) loans are the most commonly used and most basic loans offered by the U.S. Small Business Administration (SBA). The SBA is authorized by the government through the Small Business Act to provide lending to small businesses in the U.S. The name 7(a) comes directly from the act itself: Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended). 

This is a great loan option when real estate is involved, as well as working capital, refinancing of business debt, or purchasing supplies for the business. 

SBA 7(a) eligibility

The loan program is made specifically to help out for-profit businesses that have trouble finding financing for their business needs. Perhaps you’ve been denied term loans by banks or credit unions, and think you’ve got nowhere else to turn. Luckily SBA 7(a) loans are made just for these situations. 

Keep in mind that the loans are not made to individuals or small business owners, but to the businesses themselves that fill the eligibility requirements. To be considered for financing, businesses must: 

  • Meet the size standard: The business must be considered a small business under SBA’s standards.


  • Be a for-profit business: The existing business should have official registration and be legally permitted to operate. Certain types of businesses, like real estate investment firms, religious organizations, or gambling businesses are not eligible. Non-profit organizations need not apply.


  • Do business in the U.S.: The business must be located in the U.S. or its territories and must operate there.


  • Have invested equity: The owner/owners must have invested their own time and money into the business.


  • Have no other lending options: All other financing options are exhausted, and the business is not able to get funds from anywhere else.


  • Be able to repay: The business must provide proof that they can repay the loan in the stipulated amount of time. 


  • Have a sound business purpose: The business must have legitimate goals and a purpose. 


  • Not be delinquent: You will be ineligible if you are currently delinquent on any existing government loans. 


  • Have collateral: For loans more than $25,000, you must be able to provide collateral. 


  • Establish personal guarantee: For the owners that own 20% or more of the business, they must provide a personal guarantee of the repayment of the loan. This holds them personally responsible if the business loan goes unpaid. 

Lenders themselves may have other requirements that aren’t stipulated by the SBA. Typically they will want to see a good personal credit score (690 or more), substantial annual revenue, and adequate time in business (at least two years).

Types of SBA 7(a) Loans

Within the 7(a) loan program, there are several variations of loans available. The eligibility between each type of 7(a) may vary and may require some additional criteria to be met. Keep this in mind when applying for the loan of your choice. Here are some of SBA’s options for small business loans

Standard 7(a) loan

If you are looking for funding for working capital, equipment, supplies purchases, real estate, or business expansion, the standard loan could be for you. This kind of loan is especially good for large amounts, as it can fund up to $5 million! The maximum SBA guarantee you can expect is 85% for loans up to $150,000 and 75% for loans over $150,000. The application turnaround time is five to 10 business days. 

7(a) small loan

Not looking for a big loan? The 7(a) small loan is made especially for smaller financing needs. The maximum loan amount is $350,000 with a maximum guarantee from SBA of 85% for loans up to $150,000 and 75% for loans more than $150,000. Like with Standard 7(a), you can expect to see application turnaround from five to 10 business days. 

Express loan

Sometimes we need our money fast. With the express loan, you can get expedited funding for smaller loan amounts. The application turnaround time is within 36 hours, with the maximum loan amount of $500,000. SBA can guarantee a maximum of 50% of the loan. 

Export express loan

Not fast enough? Try the export express loan where your application turnaround is 24 hours! This is offered as a way to provide expedited funding to enhance the export development of your business. This type of loan is offered with a max limit of $500,000. SBA guarantees up to 90% of loans for $350,000 or less, and up to 75% of loans for more than $350,000. 

Export working capital loan

If you’re looking to fund your working capital to support export sales, try the export working capital loan. SBA allows up to $5 million maximum loan amount and will guarantee 90% of that amount. The turnaround time for this loan application is five to 10 business days. 

International trade loan

If you want long-term funding with the purpose of expanding export sales or modernizing to contend with foreign markets, the international trade loan is for you. You are again allowed a loan of a large amount, up to $5 million. SBA can guarantee 90% of the amount. The turnaround time for the International trade loan application is five to 10 business days. 

CAPLines of credit

CAPLines of credit are meant to finance short-term or seasonal working capital needs. This is the perfect loan when you don’t know exactly how much you will need. The maximum loan amount is $5 million, with SBA guaranteeing up to 85% for lines up to $150,000 and 75% for lines greater than $150,000.

Application turnaround takes from five to 10 business days. There are four lines within this program: 

  • Seasonal CAPLine: The loan proceeds are only meant to finance seasonal bumps in accounts receivable and inventory. It may also be offered as a way to fund increased labor costs. Options are either revolving or non-revolving. 


  • Contract CAPLine: This either revolving or non-revolving line of credit allows you to finance direct labor and materials when carrying out contract work. 


  • Builders CAPLine: Meant for small general contractors or builders working on commercial real estate or residential buildings. This revolving or non-revolving line helps fund direct labor and material for these projects. The project itself will be used as collateral for the loan. 


  • Working CAPLine: This business credit line was made for businesses unable to meet long-term credit standards, and that provide credit to other businesses. It works as an asset-based revolving line of credit. Financing is provided for cyclical growth, recurring needs, or short-term needs. 

Businesses repay through the conversion of short-term assets to cash that can then be repaid to the lender. Additional fees may be charged for this type of loan because it needs continual servicing and collateral monitoring. 

SBA Guidelines

The SBA sets the guidelines for all of these loan programs, and the participating SBA lenders must follow them. This includes things like maximum loan amounts, interest rates, and term lengths. However, your lender will fill you in on the specifics of your loan. 

Term Lengths

All of the CAPLines except for the Builders CAPLine allow for a 10-year maximum maturity on the loan. The Builders CAPLine cannot be more than five years.  For the other SBA 7(a) loans, the maximum term length will depend on what the loan will be used for. 

  • Real estate: 25 years
  • Equipment: 10 years
  • Working capital: 10 years
  • Inventory loans: 10 years

Interest Rates

SBA sets the 7(a) loan interest rate on the current prime rate. The prime rate is determined by the Federal Reserve Board and is used by banks to come up with rates for their consumer loans. On top of that, your lender will add a spread, which is the value added to the reference rate to account for the contractually agreed interest rate.

The spread will be either fixed-rate or variable rate, depending on your preferences. However, you are still subject to SBA maximums regarding the term length, amount, or maturity of your loan. Here are the current maximum SBA 7(a) loan interest rates as of November 2022 (based on the current prime rate of 7%):

  • If you are borrowing $25,000 or less, your max interest rate for a loan paid off in less than 7 years is 11.25%. If it will be paid in more than 7 years, the max interest rate is 11.75%. 


  • If you are borrowing between $25,001 and $50,000, your max interest rate for a loan paid off in less than 7 years is 10.25%. If it will be paid in more than 7 years, the max interest rate is 10.75%. 


  • If you are borrowing more than $50,000, your max interest rate for a loan paid off in less than 7 years is 9.25%. If it will be paid in more than 7 years, the max interest rate is 9.75%. 


  • If you are getting an SBA express loan or Export express loan, you will have a different set of restrictions for your interest rate. In these cases, your lender can charge the prime rate plus 4.5% for a loan over $50,000. For loans less than $50,000, lenders can charge the prime rate plus 6.5%. 

Loan Fees

Interest rates are not the only cost of a 7(a) loan. You may encounter a guaranty fee, which often ranges from 0.25% to 3.75% depending on the loan size. However, you will not find guarantee fees on Express loans for businesses owned by veterans. You may also encounter packaging and servicing fees, but this varies based on the lender. But, SBA doesn’t allow lenders to charge prepayment penalties, original fees, or application fees. 

 Loan application form with Rubber stamping that says Loan Approved

How to Apply for an SBA 7(a) Loan

Have you read all the eligibility requirements and learned about the various SBA loans? Ready to apply? Great! Let’s get started!

1. Find an SBA 7(a) lender

There are many financial institutions out there that offer these kinds of loans. But wait! You’re in luck. Coastal Kapital is an established SBA 7(a) lender! Look no further. 

2. Begin the application process

Here at Coastal Kapital, the application process is easy. Just fill out our online application! We will help you gather all the necessary documents you need to submit for the process. Once you’ve submitted all the information, we will submit your application package to the SBA. They will then send a loan guarantee if you are approved. This ensures that if you default on your SBA 7(a) loan, the SBA will repay us, the lender, the amount they have guaranteed. 

3. Wait for approval

Next, you’ll need to wait for the loan approval. This approval can come either directly from the lender or the SBA itself. SBA Preferred Lenders approve the loans without the SBA reviewing the application, which speeds up the application process. 

4. Close the loan

When your loan is approved, we will start working on the closing process in which we will secure your collateral, get the loan documents prepared, and look to meet any authorization requirements. You will then sign that you agree to the loan terms. Your funds will then be disbursed.

The next step is the repayment process in which you pay back the loan in monthly payments over the agreed-upon repayment terms. The whole application and loan funding process can vary, though it typically takes between 60 to 90 days in total.

Plenty of Loan Options For Your Business

So, what is an SBA 7(a) loan? An SBA 7(a) loan is a type of business financing that is partially guaranteed by the SBA and is meant to help small businesses that have trouble getting funding. There are plenty of SBA loan options, including Standard 7(a), 7(a) small loan, Express loan, Export express loan, Export working capital loan, Export international trade loan, and CAPLines of credit.   

If this type of loan is not right for you, there are many others we offer as well. Don’t let bad credit, time frame, or the fact that you have a new business startup stand in your way. Here at Coastal Kapital, we’ve also got working capital loans and equipment financing that can do the trick!

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