7(a) loans are one of the SBA’s flagship loan programs, but that doesn’t mean that everyone understands them. On the contrary, questions about 7(a) loans abound—that’s why we decided to answer some of them.
What Are 7(a) Loans?
The 7(a)-loan program is the SBA’s most common loan program. These loans are geared to small businesses and can be used for a wide variety of purposes (more about that in the next section).
7(a) loans are an attractive alternative for business owners because they usually offer more favorable conditions than conventional loans, including smaller down payments and longer repayment terms.
What Can I Use a 7(a) Loan For?
As hinted earlier, versatility is one of the strong points of 7(a) loans. These are some of the scenarios where a 7(a) loan comes in handy:
- Long- and short-term working capital
- Revolving funds based on the value of existing inventory and receivables
- The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
- The purchase of real estate, including land and buildings
- The construction a new building or renovation an existing building
- Establishing a new business or assisting in the acquisition, operation or expansion of an existing business
- Refinancing existing business debt, under certain conditions
As you can see, this list covers most of the needs of small business owners, so it’s no wonder that some refer to 7(a) loans as the Swiss Army knives of the financing world.
What Businesses Are Eligible for a 7(a) Loan?
While most businesses are eligible for a 7(a) loan, some requisites must be met. In order to be eligible for 7(a) loan assistance, a business must:
- Operate for profit
- Be considered a small business, as defined by the SBA
- Be engaged in, or propose to do business in, the United States or its possessions
- Have reasonable invested equity
- Use alternative financial resources, including personal assets, before seeking financial assistance
- Be able to demonstrate a need for a loan
- Use the funds for a sound business purpose
- Not be delinquent on any existing debt obligations to the U.S. government
7(a) Loans vs 504 Loans: What Is the Difference?
7(a) loans and 504 loans are the two most popular SBA loans, with the most important difference between them being the way business owners must use the loan proceeds.
As we saw in a previous question, 7(a) loans can be used in many different ways. 504 loans, on the other hand, have a more limited scope: they are designed as a financing solution for owner occupied properties or for purchasing heavy machinery/equipment.
Gellyfish: Certainty of Execution in SBA Loans
Looking for SBA loans in California, or anywhere in the United States? Gellyfish is here to help. We offer financing with the certainty of execution you need to take your business to the next level.
Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our full range of financing options.
