SBA 7(a) loan program & subtypes
Uses: Working capital, equipment, refinancing debt, buying real estate, business acquisition, or expansion
Unlike 504, real estate has to be owner occupied and can be combined with other uses (e.g. Acquisition/ working capital).
Real estate loan sourced from a single SBA-approved lender (bank or credit union) unlike 504 two-part structure.
Max Loan Amount
Max loan amount is $5 million
Max interest rate prime + 6.5%
Max loan term 10 years working capital
Max loan term 25 years real estate
Subtypes include: Standard, 7(a) Small Loan, SBA Express, Export Express & Export Working Capital CAPLines, Veteran Advantage
Subtypes include: Standard, 7(a) Small Loan, SBA Express, Export Express & Export Working Capital CAPLines, Veteran Advantage
SBA Pre-Qualification Checklist
Personal Credit & Financial Readiness
Equity Injection & Seller Participation
Equity Injection & Seller Participation
Credit Score: Minimum FICO of 680+ (700+ preferred for smoother approvals).
Credit History: No recent bankruptcies, foreclosures, or unpaid judgments.
Liquidity: At least 10–20% of purchase price available in cash or liquid assets (for down payment & closing costs).
Net Worth: Positive net worth (assets > liabilities).
Debt-to-Income Ratio: Existing personal debt manageable; post-loan obligations should not exceed 40–45% of monthly income.
Equity Injection & Seller Participation
Equity Injection & Seller Participation
Equity Injection & Seller Participation
Cash Injection: Typically 10% minimum equity contribution by the buyer.
Seller Financing: Check if seller is open to a note for part of the price (often 5–10% on standby counts toward equity).
Source of Funds: Funds must be documented and not borrowed (unless from a non-repayable gift).
Business Financials
Equity Injection & Seller Participation
Loan Structure & Deal Size
Profitability: Historical profitability with enough cash flow to cover loan payments (DSCR of 1.15x+ is standard).
Tax Returns: Last 3 years of business tax returns available.
Interim Financials: Year-to-date financials and balance sheet current within 90 days.
Add-backs/SDE: Adjusted owner’s compensation, personal expenses, and non-recurring costs identified.
Loan Structure & Deal Size
Loan Structure & Deal Size
Loan Structure & Deal Size
Purchase Price Range: Confirm affordability relative to cash flow and industry multiples.
Loan Amount Needed: SBA 7(a) loans typically finance up to $5M; 504 loans can go higher for real estate heavy deals.
Working Capital: Include in loan request (3–6 months of expenses recommended).
Collateral: Not required to fully secure loan, but personal assets (like home equity) may be pledged if available.
Experience & Background
Loan Structure & Deal Size
Experience & Background
Industry Experience: Direct or transferable skills related to the target business.
Management Ability: Resume should show ability to operate/scale a business.
Ownership Role: Commitment to active ownership (not absentee only).
Legal & Compliance
Loan Structure & Deal Size
Experience & Background
Citizenship/Residency: U.S. citizen or legal permanent resident (some visa holders may qualify case-by-case).
Criminal Record: No unresolved criminal charges; felonies reviewed on a case-by-case basis.
Government Debt: No delinquent federal debt (student loans, taxes, prior SBA loans).
Documentation Checklist
Documentation Checklist
Documentation Checklist
Personal financial statement (PFS).
Last 3 years of personal tax returns.
Resume or business background summary.
Bank statements showing liquidity.
Purchase agreement or Letter of Intent (LOI).
Business financials (tax returns, P&L, balance sheet).
Business valuation (if available).