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SBA 7(a) Loans: Rates, Requirements & Terms

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Your business must be considered a small business according to SBA size standards.
You must demonstrate a need for the loan and show that you have exhausted other financing options.
You must be able to show that you have invested your own time and money into the business.
You must have a good credit history and show the ability to repay the loan.
You must have collateral to secure the loan.
The lender may have additional requirements, such as a minimum credit score or specific industry experience.
Overall, SBA 7(a) loans can be a great option for small businesses looking for financing. With government backing and flexible terms, these loans can help you grow and expand your business. Make sure to do your research, meet the necessary requirements, and work with a participating lender to secure the funding you need. Nonprofit companies are ineligible for financing. Your business must be engaged in business in the United States. You must have a reasonable amount of owner equity invested in the business, and you have exhausted or have been unable to obtain other financing options. Additionally, you must not be delinquent on any federal debt and meet the SBA’s definition of a small business. Your business must not be engaged in activities that are illegal, speculative, or involve gambling or lending money.

When applying for an SBA 7(a) loan, it is important to consider factors such as personal and business credit scores, debt service coverage ratio (DSCR), time in business, down payment, collateral or personal guarantee, and repayment terms. The SBA 7(a) loan terms typically allow for a repayment length of up to 25 years for real estate, with working capital, machinery, and equipment terms of up to 10 years. However, certain types of 7(a) loans have different terms.

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There are fees associated with SBA 7(a) loans, including the SBA guarantee fee, packaging fee, extraordinary servicing fee, third-party fees, and prepayment fee. These fees can vary depending on the characteristics of your loan and are meant to cover the costs associated with processing and servicing the loan.

Overall, the SBA 7(a) loan program can be beneficial for small businesses looking for financing for various purposes. It is important to carefully consider the pros and cons of these loans and determine if they are the right fit for your business’s financial needs.

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