What is an SBA 7(a) loan?
The federal government’s Small Business Administration (SBA) has a loan guarantee program that supports commercial lending in the US. Banks and non-depository lenders can write mortgages to the SBA standards, which are guaranteed by the SBA to be repaid to the lender in the event of borrower default. Lenders who write these loans have lower risk of loss if there is a foreclosure, which encourages them to inject loans (capital) into commerce and drive higher SBA loan LTVs.
The maximum loan amount for SBA 7(a) financing is $5,000,000, and the longest term available is 25 years. Borrowers should be aware of SBA loan referral fees that lenders may pass along to them, as well as repayment penalties for loans with a 15-year or longer term. A borrower that intends to apply for one of these loans should work with an SBA broker. To qualify for an SBA loan, the business must be operated for profit in the U.S., have reasonable owner equity to invest (down payment on a purchase) and other financial resources must have been applied to it, such as personal assets, before applying for an SBA 7(a) loan. Some kinds of businesses are ineligible for SBA 7(a) loans, such as charities, religious groups, speculative enterprises, gambling and pyramid sales plans.
A borrower in need of a loan against commercial real estate should use the Lender Search Engine above to find the right lender for their scenario. If you need to refinance an SBA 7a loan, change the Loan Purpose to Refinance.
What are common types of SBA financing?
- Mortgage loans to buy an industrial plant
- Mortgage to buy a business that has real estate
- Refinance mortgage to retire or consolidate debt
- Construction of owner-occupied commercial real estate
- 90% LTV for purchase
- 100% LTV for refinance
- Partner buyout
- Cash-out refinance at 80% LTV
- Business start-up with real estate
Which lenders offer SBA 7(a) loans?
Scotsman Guide’s Lender Search can be used to find all types of lenders, including, banks, non bank SBA lenders, private lenders and direct lenders. Commercial SBA loan brokers can use the Commercial Lender Search Engine, above, to find a list of lenders that can write a loan to fit the specifications they input.
If your client is looking to refinance a loan, then you can change the loan purpose to reflect this. For construction, renovation, disaster recovery and expansion, you may also use Lender Search. Use the Government menu in all the search engines to select the loan type, SBA 7(a).
