What is a 7a Loan and how can it help my small business?

Starting a business is not just complicated, its expensive. That’s why start-ups and small businesses have the option to finance their venture with small business 7a loans. If you’re in the hotels or restaurant industry, starting a daycare center, or opening up a nursing home and need help on the financial end, this article is for you.

What is an SBA 7a loan?

The Small Business Administration (SBA) is a U.S. government agency that provides support to small businesses and entrepreneurs. The 7a Loan Program helps these businesses obtain loans from participating lending institutions.

Who is eligible for a 7a loan?

Most businesses are considered eligible for financial assistance from the Small Business Institution. The guidelines state that a business or business-owner must:
  • Be a for-profit enterprise.
  • Conduct business in the United States.
  • Have owner equity to be invested.
  • Have a record of good character and sound business practices.

Who is not eligible for 7a loans?

Businesses conducting illegal activities, multi-sales distribution, gambling, charitable giving, or investing are not eligible. Additionally, entrepreneurs who are no parole are not eligible either. Here are a few examples of such enterprises:
  • Pyramid sales companies: Businesses in which the participant’s incentive is based on sales made by a growing number of participants below him.
  • Racetracks and casinos: Any business based primarily in gambling.
  • Real estate investment firms: Any business that holds property for investment purposes.
  • Churches: Entities promoting religious objectives or any organization based on charitable donations are not eligible.

What can a 7a loan be used for?

These loans may be used to open up a new business or to expand or continue the operation of an existing business. They cannot be used to pay delinquent taxes, refinance debt in a way that would be detrimental to the lender, or conduct unsound business practices. Acceptable uses of these loan funds include:
  • Purchasing new equipment.
  • Covering the cost of construction.
  • Refinancing debt in a way that is beneficial to both the borrower and the lender. Other short- or long-term needs.

Is there a maximum or minimum loan amount?

The maximum amount that can be borrowed under the 7a loan program is $5 million.

If you are interested in learning more about 7a loans, reach out to Anchor Banc and check out the U.S. SBA website today.