SBA Loan Programs
Types of loans
Regular 7(a) Loan - utilizes the full SBA loan application
Preferred Lender Program (PLP) Loan - utilizes the full SBA loan application
SBA Express Loan - does not utilize an SBA loan application
504 Loan - Fixed asset financing similar to 7(a) using a Certified Development Co.
The 7(a) Loan Guaranty Program - Types of Loans
Term Loans - any SBA loan program
Lines of Credit - generally under SBA Express
Contract Loans
Seasonal Loans
Builders Loans
For more details about the 7(a) Loan Program go to: www.sba.gov/financing/sbaloan/7a.html
How Lender's obtain the SBA Guaranty
Regular 7(a) Loan - the loan is submitted to the local SBA Office for processing
PLP Loan - Lenders with PLP status make decision without submitting loan to SBA
SBA Express Loan - Lenders with PLP or Express status make decision without submitting the
loan to SBA
504 Loan - the loan is submitted to 504 Processing Center-Sacramento
Use of proceeds
Construction of new building or renovation of existing building
The purchase of
land or buildings
machinery and equipment
furniture and fixtures
leasehold improvements
inventory
Working Capital
Refinancing existing debt
Why lenders consider using SBA's guaranty
Longer maturity needed
Lender's legal or policy limit
Collateral inadequate
Start-up or certain types of businesses
Leverage
Loan Amounts & Guaranty Percentages
Maximum loan size of $2,000,000
Maximum SBA exposure up to $1,500,000 for guaranteed loans
85% on loans <=$150,000
75% on loans > $150,000
50% on loans processed under the SBA Express Program
7(a) Loan Program - Terms
Up to 10 years for working capital
Up to 15 years for fixed assets
Up to 25 years for real estate, construction
Interest Rates
Negotiated between borrower and lender
Cannot exceed prime rate plus 2.25% for loans < 7 years and 2.75% for loan > 7 years.
Certain loan programs and smaller loans permit higher interest rates
Guaranty Fees
Maturity Loan $ SBA Fee
<12 mos. All 0.25%
>12 mos. <=$150,000 2.0%
>12 mos. $150,000 to $700,000 3.0%
>12 mos. $701,000 and up 3.5%
Plus an additional up-front fee equal to 0.25% of amount by which SBA guarantee >$1,000.000
Prepayment Fees
Maturity of 15 years or more
Prepayment exceeds 25% of loan balance
Prepayment made within first 3 years after date of first disbursement
Fees range from 1% to 5%
7(a) Program Loan Requirements
Business must be "small" based on applicable NAICS Code standard
Business type must not be otherwise ineligible
Business must be operated for profit
Principal(s) must be of good character
Principal(s) must be US Citizen or have a valid "Green Card" (other restrictions may also apply)
Principal(s) must meet the Liquid Personal Resources Test
What the Lender and SBA look for when underwriting a loan
Ability to repay the loan through historical performance and/or projections
Good credit
Equity
Management experience
Collateral
For more information about SBA loan programs click here