SBA 7a Loans – Frequently Asked Questions

An exhaustively researched guide to SBA 7a loans.


SBA 7a Loan FAQs

Speritas Capital Partners CEO Jeff Bardos answers the most common (and not so common) questions we receive from clients about 7a loans in the list below.

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What kind of loans are offered by the SBA?

The main SBA loan programs are referred to as 7a and 504. SBA loans can be arranged for business acquisitions, franchise acquisitions, and business expansions and for acquiring, renovating or constructing real estate in which your business will operate.

The SBA offers 6 different loan programs in addition to the SBA 7a and SBA 504 programs –  SBA CAPlines, Export Loans, Disaster Recovery Assistance, Microloans and Surety Bond Guarantees.


Am I Eligible for an SBA 7a Loan?

Eligibility depends on many factors so it’s hard to say if you’re eligible. There are four areas Speritas Capital needs to understand in order to determine if you and your business are eligible: the business financials (historical for existing businesses or projected for new ventures), your credit profile, your personal financial situation and your experience. The best way to find out is to contact us. We’re happy to have an exploratory conversation.


How Much Equity do I need to Contribute in an SBA 7a Loan Structure?

This is a complicated issue, but SBA lenders will generally not lend you 100% of the acquisition price nor will they lend 100% of the cost of your expansion project. SBA regulations require that the borrower contribute at least 10% of the total cost. The 10% cannot be borrowed from someone else (although even here there are exceptions.)

Lenders can provide the other 90%, but sometimes they require more than 10% equity. Seller financing (aka seller carrybacks) can be used to bridge the gap between your equity and the SBA loan amount. These seller notes must meet lender requirements on maturity, interest and subordination.

There are specific cases where the amount of equity needed can be less than 10%, such as a partner buyout.

Read more about equity injection requirements in our recent post about acceptable equity sources.


What are the Current Rates for SBA 7a Loans?

Most 7a lenders offer variable or adjustable rate loans that are based on the Prime rate. Most lenders price 7a loans between Prime + 1% and Prime + 2.75%, with 2.75% being the most common spread over Prime.

The Prime rate is set by each bank and generally adjusts up or down whenever the Federal Reserve changes their target Federal funds rate.


What are the Loan Maturities for SBA 7a Loans?

The maximum maturity is determined by the purpose of the transaction. For business acquisitions and expansions, the maximum maturity is 10 years. If there is real estate involved, the maximum maturity can be extended out to as long as 25 years. In situations where a business acquisition involves business assets and real estate, the maturity will be based on a weighted average of the value of the business assets and the real estate.


How Long does it Take an SBA 7a Loan to Close?

Contrary to some common misconceptions, SBA loans do NOT take longer than conventional bank deals. At least not with the lenders that Speritas Capital works with.

You can expect to close within 30-60 days of receiving a proposal from the lender. The exact timing depends on how complicated the deal is and how responsive you are in providing documentation.

In business acquisition and owner-occupied real estate deals, the lender may require a third party business or property appraisal. Revised or new insurance documents need to be produced. These requirements take time and can push you closer to 60 days, or possibly longer in complex cases.


What Types of Lenders can Make SBA Loans?

Banks and so-called “nonbank” lenders can offer SBA loans. On the bank side, SBA lenders range from the biggest U.S. banks to community banks. Nonbank lenders tend to be smaller and privately funded.

Not all SBA lenders have the same level of creativity and flexibility when looking at potential 7a loans. Some lenders have a very conservative approach and will not deviate from their standard terms. Other lenders are innovative and look at how they can comply with the SBA regulations while providing a loan structure that fits the borrower’s needs. Speritas Capital works with the most flexible lenders.

Read about one of our recently funded SBA 7a loans for a restaurant acquisition, by one of our SBA PLP lenders that required some creative storytelling.


What is an SBA ‘PLP lender’?

The Preferred Lenders Program (PLP) is used by the most experienced SBA lenders. PLP lenders must complete an SBA application and review process to ensure that they have the expertise to comply with the SBA regulations. Once approved, PLP lenders have delegated authority to structure, underwrite, close and service SBA guaranteed loans without prior SBA review. PLP lenders are responsible for underwriting each loan and for confirming 7a eligibility.

Speritas Capital only works with PLP lenders because they have the most flexibility to structure a loan to meet a borrower’s needs and because PLP lenders can move more quickly than non-PLP lenders.


Can I Get a Fixed Rate SBA 7a Loan?

A few lenders will offer fixed rate loans in specific cases. But you should expect that your 7a loan will have a floating rate based on a spread over the Prime rate.


What is an SBA 7a Express Loan?

These are 7a loans up to $350,000 with a 50% SBA Guaranty. You can expect a quicker approval turnaround, possibly within 36 hours. The rates are higher than other 7a loans. The spread over the Prime rate ranges from 4.5-6.5%. Additional points could apply.

Unless you’re focused on a very quick approval, you should consider a regular 7a loan which will have a lower rate.


Does the SBA Offer Loans under $50K?

Yes!  The SBA calls these ‘Microloans’.  We receive many calls and email inquiries asking about smaller loans. We wish we could help but these are well below our minimum loan amount of $250K. If you’re looking for an SBA loan under $50K – an SBA Microloan – these are funded by the SBA but administered by local nonprofits. Contact them directly. View the national list of SBA Microloan providers. 


View our list of SBA White Paper Sources.


Contact Us

You need a strategic, cost effective solution to your financing needs and a funding partner you can trust. Let us put our decades of banking and structuring experience to work for you – with no upfront fees. Contact Speritas Capital Partners about your eligibility for an SBA loan today.


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