The 7a Loan
To ensure small businesses access to credit, the Small Business Administration (SBA) has various programs specifically tailored for individual business needs. The SBA does not make direct loans to businesses - it provides banks and other financial institutions up to 75% guarantee against loss in case of default. If adequate management experience, earning capacity, and capital base are demonstrated by a loan applicant, SBA will favorably consider a loan application.

Heartland Business Capital (HBC) provides consulting, packaging, and preparation services to businesses considering any of the SBA loan products.

Minimum Loan Amount:
None
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Maximum Loan Amount:
The SBA may provide up to 75% or a $1,500,000 guarantee, whichever is lower.
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Guarantee Amount:
Up to 85% on loans $150,000 and less. Up to 75% on loans over $150,000
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Use of Loan Proceeds:
Working Capital
Furniture & Fixtures
Inventory
Real Estate
Machinery and Equipment
Leasehold Improvements Buyouts
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Down Payment:
The equity requirement (or down payment) for an existing business is at least 10%; for a new business or the purchase of an existing business, it generally ranges from 25% to 50%. Forms of down payment can include cash, assets owned to be used in the business, or debt that is subordinate to the SBA loan in both collateral and repayment.
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Maturity of Loan:
Working Capital: Up to 7 years
Machinery and Equipment: Up to the depreciable life of the asset
Real Estate: Up to 25 years
The SBA will not allow a lender to "call" or "balloon" a 7(a) loan
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Eligibility:
Under the 7(a) program, each type of business has a different size standard that cannot be exceeded.
Generally, the criteria are:
Manufacturers: Employ< 500 people
Wholesalers: Employ< 100 people
Construction Contractors: Sales < $7.0 million
Retail & Service Businesses: Sales < $5.0 million
SBA also has a limited number of industries and situations that are not eligible for any type of SBA financing (i.e. not-for-profit companies, financial institutions, or speculative real estate projects). For specific eligibility factors, contact HBC.
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Maximum Rates of Interest:
The interest rate on the loan is negotiable between the lender and the business. However, SBA sets a maximum amount of interest a lender may charge a business using the 7(a) loan:
If term < 7 yrs: Prime + 2-1/4%
If term > 7 yrs: Prime + 2-3/4%
The interest rate may be either variable or fixed. This is negotiable between the borrower and the lender. For loans under $50,000, maximum interest rates can be higher. Please contact HBC for specific maximums.
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Collateral:
SBA normally requires a general security agreement with a lien on all business assets. Personal assets of the primary owner(s) will be considered for collateral if business assets are not sufficient to adequately secure the loan.
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Personal Guarantees:
Always required of all principals owning 20% or more of the company's stock. May be required for ownership under 20%, depending upon involvement in business and other credit factors.
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Personal Liquidity Considerations:
If the individual owner(s) of a company has liquid assets in excess of certain thresholds, these assets must be used to reduce the total amount of financing before consideration of an SBA loan. Contact HBC for specific amounts of liquid assets allowable.
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Fees:
The SBA charges the lender a guarantee fee between 2% to 3.5% of the guaranteed portion, depending on the amount of the loan. This fee is generally passed by the lender directly to the borrower.

The SBA also charges the lender 1/2% annually on the outstanding principal balance of the loan - this fee cannot be charged to the borrower, but may affect the amount of the interest rate a lender charges on the loan.
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Lo-Doc Loans:
As of 10/01/2005, SBA has terminated the Lo-Doc program. However, in 2008, the SBA reinstated the program and it is now called Lender's Advantage.
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Lender's Advantage:
A simpler application and expedited loan processing (generally 3-5 days) for loans less than $350,000.

Designed to meet the needs of lenders making fewer than 20 SBA loans (based on 3 yr. historical avg. of approvals) per year.

Applications can be transmitted by fax or e-mail (if less than 5mb) to a centralized processing center. Online processing available in fall 2008.

Our primary goal is to prepare a complete loan package that will be approved with minimal delays.

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