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The Small Business Administration SBA 7a Loan Guarantee program is one of the most popular loan programs by the agency and is the basic SBA loan program. A 7a loan guarantee is provided to lenders to make them more willing to lend money to small businesses with “weaknesses” in their loan applications.

For example, a business startup would not have a cash flow history to provide a lender with the assurance of continued ability to pay back a loan. So the SBA 7a loan would serve to provide the lender with an increased guarantee against default. The SBA warns that lenders do not have to accept 7a loans.

How Much Can You Get in an SBA 7a Loan?

SBA 7a loans are for a maximum of $5 million, with an SBA loan guarantee of 85% for loans up to $150,000 and 75% for loans greater than $150,000. SBA 7a loans are 25 years for real estate and equipment and ten years for working capital. Interest rates are based on the prime rate, the loan’s size, and maturity.

How can I use 7a funds?

The SBA 7a Program lets you get loan amounts (up to $5 million) to fund startup costs, buy equipment, and more. Here’s what else you can do with 7a funds:

  • Purchase new land (including construction costs)
  • Repair existing capital
  • Purchase or expand an existing business
  • Refinance existing debt
  • Purchase machinery, furniture, fixtures, supplies, or materials

What are the benefits?

The 7(a) Program offers flexibility, longer terms, and potentially lower down payments than other financing options. There are also specialized programs for individuals interested in exporting, those located in underserved communities; members of the military community; and small business owners looking to meet their short-term and cyclical working capital needs.

What are the repayment terms?

You can repay most 7(a) term loans with monthly principal and interest payments. The payments stay the same for fixed-rate loans because the interest rate is constant. The lender can require a different payment amount when the interest rate changes for variable-rate loans. 

7(a) Small Loan $350,000 < is Collateral Required?  

No need for Lenders to take collateral for loans up to $25,000. For loans over $25,000, up to and including $350,000, the lender must follow the collateral policies and procedures it has established and implemented for its similarly-sized non-SBA-guaranteed commercial loans. Still, at a minimum, the lender must take a first lien on assets financed with loan proceeds. The lender must take a lien on all the applicant’s fixed assets, including real estate. No need for the lender to take a lien against the applicant’s real estate when the equity is less than 25% of the fair market value. The lender may limit the lien taken against real estate to the loan amount.

7(a) Standard $350 > Collateral Requirements?

No need for lenders to take collateral for loans up to $25,000. For loans over $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount. If business fixed assets do not “fully secure” the loan. The lender may include trading assets (using 10% of current book value for the calculation) and must take available equity in the principal’s personal real estate (residential and investment) as collateral.

What else should I know?

Keep in mind that the SBA doesn’t fund these loans directly to small business owners, but banks receive a guarantee that the SBA will repay a portion of the loan if you default on payments. If you think you’re suited for a 7(a) loan, check out these resources and a checklist to help prepare your loan application.


BitX Funding is an online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and are passionate about helping your company reach its full potential.

You can reach a loan specialist toll-free at 1-800-824-2407, email [email protected] or apply online here, and we can guide you on which loan is the best fit for your business.

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