SBA 7a Small Loan
Great for starting, great for expanding
- Start-ups or in business less than three years
- Located in an underserved community
- Interested in opportunities for growth
- Have limited financial resources
If your needs are real estate, consider the SBA 504 loan.
The 7a loan is designed to help start-up businesses obtain capital to fund most of their startup needs.
The 7a loan is outstanding for all your working capital needs, such as wages, marketing, utilities, rent and more.
Is your business location needing some renovations, whether or not you own the building? The 7a is a great resource.
The 7a loan is excellent for buying new or used equipment for your business.
The 7a can refinance high-interest debt term debt or revolving debt, such as credit cards.
Purchase an existing business or complete a partner buyout with an SBA 7a loan.
How does the SBA 7a Small
Loan program work?
The SBA 7a Small Loan program provides small businesses financial assistance through approved lenders, such as Arizona Capital Source (ACS). ACS provides the loan, while the SBA guarantees a portion of it, similar to an insurance policy. This reduces lenders’ risk, making it easier to provide financing for “riskier” businesses, such as new businesses or businesses in the food and beverage industry. For start-up businesses and/or loans that include tenant improvements, ACS offers up to a 6-month, interest-only draw period to give you time to pull money out of the loan while keeping your payment to a minimum.
Program details
- Loan amounts: Up to $350,000
- Interest rate: Variable interest rates based on Prime and determined on a case-by-case basis
- Term: Up to 10 years for general funding; up to 25 years for real estate purchases
- Borrower contribution:
- Start-up businesses, generally 10% of the total project
- Existing businesses financing working capital, tenant improvements, and/or equipment, generally 0%
- Real estate purchases, generally 10% of the total project cost
- Timeframe: Pre-approvals in 2-4 days; final approval in 30-45 days; closing/funding in 3-6 weeks after final approval (depends on complexity of financing)
What is the Process?
Pre-Qualification
The first step is to obtain our pre-approval, which determines creditworthiness and SBA eligibility. Depending on your financing request, you may be eligible for our Accel program, which provides a faster turnaround time. Once you are pre-approved, we will provide a Letter of Intent that outlines the terms and conditions of the SBA 7a Small loan.
Obtain SBA Authorization
Our team will work closely with you to complete the full SBA application and obtain the final SBA 7a loan approval, aka Terms and Conditions (T&C). The T&C is the final document that describes the total project costs, loan amounts, guarantors, etc.
Loan Closing
Once the SBA approves the loan, we’ll collaborate with our closing attorney to close the loan. The attorney will ensure all closing requirements as outlined by the SBA are met. During this phase, you’ll need to have all insurances in place, and if financing construction/renovations, the final construction contract and any required licenses and permits.
Loan Funding
Once the loan is closed, we’ll begin funding the loan. If on a 6-month interest-only draw period, you’ll have 6 months to pull out the funds as needed. If construction is involved, our construction monitoring group will work directly with your general contractor to manage the process and disburse the construction draws. Once all draws are completed and the 6-month interest-only period ends (if applicable), your normal principal and interest payments will begin for the remaining term of the loan.
Key differences in 7a vs 504 loans
- SBA 7a can fund working capital, inventory, renovations on leased locations, equipment, etc. The SBA 504 loan is only for real estate or equipment purchases.
- The SBA 7a rate is usually variable and greater than the SBA 504 fixed rate.
- SBA 504 typically requires collateral equal to the loan amount. The SBA 7a can be under collateralized.
- The maximum loan term for 7a loans is 25 years for real estate and 10 years for working capital, while 504 loans have a 10,20 or 25-year loan term.
- The SBA 7a loan has no prepayment penalty on loans under 15-year terms, while the SBA 504 has a 5- or 10-year prepayment penalty for loan terms of 10 or 20/25 years respectively.
Have questions about the 7a and what it can or can’t be used for? Our payment calculator will give you rough estimates. The best way to find out if the 7a is the right tool is to talk to one of our experienced loan officers.
Get started
loan application process and get started today.