When speaking with borrowers and intermediaries, one of the inevitable questions is “why should I consider an SBA 7a loan? What makes it better than a conventional loan?”
I quickly rattle off what an SBA 7a is, then list the differences, which I’d like to summarize here. A Google search will yield similar results:
What is an SBA 7a loan? Offered by almost 4,000 banks, this loan is the flagship of the US Small Business Administration lending effort supporting owner/operators. In its essence, the 7a is a term loan, typically 10-25 years, fully amortizing, priced at a spread over prime rate. There is no minimum borrowing, and the loans are capped at $5,000,000. The loans are used to acquire or expand business, to buy real estate, to refinance debt and pretty much any use (except cashing out). The loan is offered by banks, which are in turn provided a repayment guarantee from the US SBA.
Why chose an US SBA 7a loan over a conventional loan? Foremost and realistically, there is little overlap in availability; we see very few loans that would qualify for a conventional bank loan mostly due to lack of collateral. Second, US SBA 7a loans (not true for all lenders, true for us) do not require real estate or other “hard assets.” We are required to place liens on assets we finance but are permitted to provide loans to businesses with no assets. Third, advance rates are higher, and we often do 90% LTV loans. The SBA recently liberalized its policy making it easier to lower the down-payment with cooperative sellers who are willing to remain in some ownership capacity. Fourth, with the right lender, the SBA 7a is suited for riskier, more complicated uses such as startups, multi-unit franchise businesses, consulting and others.
But probably the most important difference is the level of expertise and attention you get from SBA lenders like us. That’s all we do. We are experts, we know what it takes to close an SBA loan and we work hard to support your plans (and dreams). Let’s talk! Our team of experienced SBA professionals is ready to assist and will gladly answer any additional questions you might have about SBA loans.