Small businesses are the lifeblood of the United States economy, and the Small Business Administration (SBA) loan program is designed to help them grow and create jobs. Loans can breathe new life into organizations of all sizes, but they can be especially helpful for small businesses.
Are you looking for a loan to help grow your business? Not sure if you qualify, or how to start the process? We’re here to give you the full rundown.
What Is an SBA 7(a) Loan?
The SBA is a government agency that provides financial assistance to small businesses and entrepreneurs. One of the ways it does this is through the 7(a) loan program.
SBA 7(a) loans are the most popular type of SBA funding. They can be used for various purposes, including working capital, business expansion, equipment purchases, real estate acquisitions, and much more.
Do I Qualify for an SBA Loan?
The SBA loan qualifications and eligibility requirements are as follows:
- You must be a U.S. citizen or permanent resident, and your business must operate in the U.S. or its territories.
- You must run a legal for-profit business that operates in an eligible industry.
- You must own at least 51% of the organization.
- Your business must have a tangible net worth below $15 million and an average net income over the past two years below $5 million.
- You must have a good credit score.
The SBA does not make loans directly to small businesses. Instead, it partners with lenders that can provide the financing.
To get started, reach out to an SBA-approved lender like Fountainhead and fill out an application. You will need to provide your personal financial information, your business’s financial information, and details about your business proposal. Fountainhead can guide you through the application process and help you put your best foot forward.
7(a) Loan Terms and Conditions
If you’re approved for an SBA 7(a) loan, you may be able to borrow up to $5 million. The terms of your loan will vary depending on the amount you borrow and the purpose of the loan, with repayment periods ranging from 10 to 25 years. Interest rates vary depending on the strength of the transaction and the loan program usually requires a down payment of 10%.
While SBA 7(a) loans can be used for a variety of purposes, there are some restrictions on how the loan proceeds can be used. For example, you cannot use 7(a) loan funds to pay off personal debt. The funds must directly benefit the business, not the owner.
With flexible terms and competitive rates, it’s no wonder that this is one of the most popular financing options for small businesses.
If you’re unsure about how much you might qualify for or what your business can afford, reach out to Fountainhead. Our loan specialists can help you understand your options and put together a financing package that’s right for your business.
Tips for Qualifying for an SBA Loan
You can do a few things to increase your chances of qualifying for an SBA loan:
- Stay organized. Ensure your business is organized and has all the necessary licenses and permits. This includes having up-to-date financial statements and tax returns.
- Keep good records. Maintain detailed records for your business expenses, revenue, and cash flow. This will help you keep track of your finances and show lenders that your business is healthy.
- Have a strong credit history. Pay your bills on time and work to improve your credit score. This will show lenders that you’re a responsible borrower and increase your chances of qualifying for a loan.
- Prepare a business plan. A well-written business plan will give you a clear idea of your business goals and how you plan to achieve them. It will also make you more attractive to potential lenders.
- Work with a specialized lender. Specialized lenders like Fountainhead understand the complexities of the SBA loan process. Unlike other commercial lenders, we have the experience and knowledge to help you navigate the application process and increase your chances of getting approved. With more than 380+ years of combined SBA lending experience, we’re the nation’s leading provider of SBA-backed financing.
The Bottom Line
Qualifying for an SBA 7(a) loan is a multistep process, but if you’re a small business,this loan product was made for you. It’ll likely be the cheapest financing you come across and will be worth the time and effort. To increase your chances of securing approval, make sure you have all of your ducks in a row and work with a specialized SBA lender. Then, with some preparation, you can get the funding you need to grow your business.
Understanding how to quickly secure an SBA loan is critical for small-business owners. At Fountainhead, we make the process easy so you can get back to what’s important — running your business. We offer both SBA 7(a) and SBA 504 loan products, and our experienced team can help you choose the right one for your needs. To learn more about our financing options, contact us today.