How to Get an SBA 7(a) Loan

A small business owner fills out paperwork for his SBA 7(a) loan.

Whether you’re looking for help with startup costs or you need money to open a second location, SBA 7(a) loans can provide funding when you need it the most.

These special small business loans — funded and overseen by the Small Business Administration — are designed to provide financial assistance to small businesses for situations such as:

  • Starting your business
  • Buying another business
  • Opening a new location
  • Buying land
  • Buying tools and equipment
  • And more

So how exactly can you get an SBA 7(a) loan? And what do you need to do to qualify?

We’ve got some of those answers — and more little-known SBA 7(a) loan secrets — here!

What Is an SBA 7(a) Loan?

An SBA 7(a) loan is the main program that the SBA offers to provide funding to America’s small businesses. There are multiple types of 7(a) loans bundled into this single program, including:

  • Standard 7(a) loan: This small business loan can provide $5 million maximum, with about 85% of loans up to $150,000 guaranteed by the SBA. The life of this loan is typically 10 years. Loans up to $25,000 do not require collateral to secure the loan.

  • 7(a) small loan: This loan is designed for businesses that need smaller amounts of capital. Like with the standard 7(a) loan, the SBA guarantees 85% of loans up to $150K. Collateral is required to secure the loan if you’re applying for a 7(a) small loan of more than $35K.

  • SBA Express: Need your money in a hurry? This small business loan provides approval decisions in less than 36 hours, which is ideal for businesses that need accelerated funding. SBA Express loans are capped at $350K, with collateral required for any loan amount over $25K.

SBA loans are administered by local banks and credit unions. Plus, most SBA 7(a) loans are guaranteed by the SBA for up to 85% of the total loan, making them a safe and secure source of funding for both banks and small business owners.

If you’re ready to apply, you can find an SBA-approved lender here.

What Are the Eligibility Requirements?

SBA loans are designed to be readily accessible to small businesses, so eligibility requirements are fairly generous.

Take a look at the situations in which you are eligible to apply for this small business loan (note: these are subject to change):

  • You’re registered as a for-profit business entity.
  • You are not on parole.
  • Your personal net income for the past year was less than $5 million.
  • Your business’s revenue for the past three years was less than $7.5 million.
  • You have fewer than 500 employees.
  • Your business is based in the United States.
  • You have all the required licenses, permits, and insurance policies to be operating legally.
  • You’re not delinquent on any personal or federal debts (for example, tax debts, federal student loan debts, etc.).
  • You’ve been unable to secure funds from other sources.
  • You are able to guarantee loans with collateral, if required.

Pretty confident you’ve met the eligibility requirements? Let’s dive into the process for applying for that 7(a) small business loan.

How to Apply for an SBA 7(a) Loan

1. Download the SBA 7(a) loan application.

Here’s the most recent application form. This is the primary application your lender will use to determine if you qualify for this small business loan.

2. Complete your personal background and financial statements.

The Statement of Personal History and Personal Financial Statement forms give the SBA a closer look of who you are personally, as well as a small business owner. These documents will provide information on your credit history and personal character.

3. Prepare your business financial statements.

The SBA primarily wants to see your Profit & Loss Statement and Projected Financial Statement to make sure your small business will be able to repay the loan you’re applying for.

If you need help creating these statements, you may want to consider writing out a business plan and using that information to form the foundation of your business financial statements. You can download our business plan template to help you get started:

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Cut out the learning curve. Download our FREE business plan template here!

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4. Get a copy of your business license and business insurance policies.

Your business license and business insurance policies make it evident to the SBA that you’re operating legally and have the right protection in place to prevent your business from suffering catastrophic financial losses.

If you don’t currently have a business insurance policy, you can quickly compare quotes from top insurance providers with us (we’re talking less than 10 minutes!).

Or if you already have a policy with us, you can request a Certificate of Insurance (COI) to submit with your SBA loan application.

5. Provide your loan application history.

Part of the approval process for this SBA loan is to show that you’ve been rejected for other small business loans. Ask your local lenders for copies of those applications so you can attach them to your primary SBA application.

6. Attach your personal and business tax returns.

The SBA usually requests at least three years’ worth of personal and business income tax returns (both state if applicable and federal).

7. Add your professional resume.

Whether it’s a professional CV or a download of your LinkedIn profile, this resume gives the SBA a better understanding of your history as a small business owner.

8. Provide a copy of any leases you may have.

If you rent a building, studio, or office, the SBA will need a copy of your lease. Don’t forget that you may need to include proof of your general liability insurance policy as well, because that shows you’re making efforts to protect your business from legal and financial claims.

9. Write a statement of how you’ll use the loan.

No need to go in-depth here; a few paragraphs or an executive summary of how the loan will be used should suffice.

10. Include any requested information.

Keep an eye out for requests for additional info that pertain to your specific situation, like partnership agreements, proposed Bills of Sale, and more.

One important note: If you’re applying for a loan over a certain amount, the SBA may ask you to provide collateral to ensure that you’ll repay the loan.

That collateral (like your business’s inventory or building) will likely be required to have insurance protection, so it’s a good idea to either get or double-check your business insurance policy before applying for the loan.

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Don’t forget to consult with your accountant, your banker, your attorney or your insurance agent if you have any questions about what information might be needed to help get approved for this loan.

Increase Your Approval Odds with These Hidden SBA 7(a) Loan Requirements

While the SBA doesn’t specify these exact eligibility requirements, you can improve your odds of getting approved if you can meet one or more of these SBA (7a) loan requirements:

  • You have a credit score higher than 680
  • You’ve owned your small business for at least two years OR
  • You’ve operated in the same industry for two years
  • You can show sufficient cash flow to repay your loans
  • You don’t have any foreclosures or bankruptcies in your personal or professional history
  • You can make a down payment of 10% or more if you’re using the loan to buy a business, inventory, or equipment

2020 SBA 7(a) Loan Rates

SBA 7(a) loan rates are moderately low, making the loan a good choice for small business owners who need funding without getting gouged by sky-high interest rates. Here’s a quick rundown of 2020 SBA 7(a) loan rates (note: rates are subject to change).

Standard 7(a) loans for less than 7 years

  • $0–$25,000, Prime + 4.25%
  • $25,001–$50,000, Prime + 3.25%
  • Over $50,000, Prime + 2.25%

Standard 7(a) loans 7 years or longer

  • $0–$25,000, Prime + 4.75%
  • $25,001–$50,000, Prime + 3.75%
  • Over $50,000, Prime + 2.75%

7(a) small loans

  • Same as standard 7(a) loans

SBA Express: loans under $50,000

  • Prime + 6.5%

SBA Express: loans over $50,000

  • Prime + 4.5%

You can locate more information on SBA 7(a) loan rates here.

Got any additional questions about applying for an SBA loan? Want to share your own insights with us? Leave us a comment below — we’d love to hear from you!

Mariah Bliss

I love writing about the small business experience because I happen to be a small business owner – I’ve had a freelance copywriting business for over 10 years. In addition to that, I also head up the content strategy here at Simply Business. Reach out if you have a great idea for an article or just want to say hi!
Mariah writes on a number of topics such as small business planning, contractor insurance, and business licenses.