7(a) loans are one of the most popular programs through which the Small Business Administration (SBA) helps small business owners in the United States.
Keep reading to learn more about 7(a) loans: what they are, what are the differences compared to other SBA financing programs, and the conditions a business must meet in order to be eligible for a 7(a) loan.
What Are SBA 7(a) Loans?
These are loans guaranteed by the Small Business Administration (SBA) to provide financial assistance to small businesses. Proceeds from 7(a) loans can be used for a variety of purposes, including the purchase of commercial real estate, business financing, and equipment financing. 7(a) loans are considered SBA’s primary method of assisting small businesses in the U.S.
What Are the Differences Between SBA 7(a) Loans and SBA 504 Loans?
This is a common question since 504 loans are also a popular SBA program. They share some basic principles but there are also important differences to keep in mind.
While 7(a) loans are capped at $10 million, 504 SBA loans can range from $125,000 to $20 million, or more.
The interest rates on a 504 loan are fixed, while 7(a) loans have predominantly variable rates (although there are some fixed-rates options as well).
Finally, the down payment for a 504 loan is 10 percent. By contrast, with 7(a) loans the minimum down payment is 10 percent, but you may be required to pay more than that.
What Businesses Are Eligible For a 7(a) Loan?
SBA finances business, so it makes sense the eligibility criteria apply to the business itself, and not to the owners. These are the characteristics of businesses eligible for a 7(a) loan:
- Meet SBA size standards (use this online tool to determine whether your business is considered small by SBA standards)
- Operate legally and for-profit in the U.S. or its territories
- Not have the resources (business or personal) to provide the financing
- Be able to demonstrate repayment
Gellyfish: Certainty of Execution in Financing
Looking for equipment financing 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.
