If you’re an established small business owner in 2022, you want to prepare for any occasion. With the pandemic, the war in Europe, and the economic flux of recent months, it’s challenging to know what will happen next. Not only do you want to grow, but you also want to handle unforeseen events and have the revenue to do so. Fortunately, if you own a small business with a proven track record, you could be eligible for an SBA 7a loan guarantee.
The Small Business Administration offers unique programs for small business owners to secure eligible financing for their businesses. This article will discuss the SBA 7a loan guarantee program and how you can utilize it to stay on top of your business.
What is the Small Business Administration, and What Services Offer?
The Small Business Administration (SBA) is a unique government agency whose sole purpose is to aid small businesses in finding and qualifying for financial assistance. Its purpose is to boost the U.S. economy by strengthening small businesses. Not only does the SBA provide small business loans, but it also assists entrepreneurs in accessing loans, advocacy services, and business development. Notably, the SBA offers free guides to educate and help small businesses achieve their goals.
When selecting suitable loans for your small business, it’s essential to consider the options. The SBA has several loan programs to cover a diverse set of small business needs. More popular options include the microloan program, 504 loan, and COVID-19 relief options. However, the most popular SBA program is the SBA 7a loan guarantee.
What is an SBA 7a Loan Guarantee, and Do I Qualify?
The SBA 7a loan guarantee allows small business owners to qualify for loans they would not otherwise. Rather than directly lending money to an entrepreneur, the SBA sets the guidelines for the loan and ensures the lender and borrower meet those guidelines. After a significant approval process, the SBA guarantees up to 85% of the loan. This guarantee makes the SBA 7a program highly advantageous to small business owners who receive the loan while removing significant risk from the lender.
To qualify for SBA 7a loans, you will need at least two years in business (no start-ups), a 650+ credit score, and at least 300k in annual revenue. Additionally, it would be best if you were prepared to have collateral for loans greater than 25k. Even if you meet the minimum requirements, this is no guarantee you will receive a loan guarantee. The SBA takes on significant risk in financing 7a loan guarantees. As a result, a rigorous application process ensures businesses are established and equipped to pay the loan back. Fortunately, the team members at BitX Funding are experts in the SBA loan process and can help you get set up immediately.
What Can I use SBA 7a Funds For?
One of the premium advantages of the SBA 7a loan is that you can use the funds for a wide variety of applications. Further, due to the significant amount of funds you can qualify for, there are several ways to spend your revenue.
For small business owners who want to expand, funds are available to purchase new equipment, real estate, and office supplies, and scale the business. Additionally, companies looking to rehabilitate their credit can use funds to repair existing capital, refinance debt, and use them as a reserve for emergencies. To sum up, SBA 7a loans can you used for the following applications.
- Fund start-up/scaling costs
- Purchase new equipment
- Obtain new real estate
- Repair existing capital
- Refinance existing debt
What are SBA 7a Repayment and Collateral Terms?
Typically, the repayment period for SBA 7a loans is up to ten years for capital loans and up to 25 for commercial real estate loans. You make fixed payments monthly for fixed-rate loans for principal and interest on the loan. Variable-rate loan repayments will depend on the guidelines set out by the SBA for that loan.
Depending on the amount you borrow, you may need to offer collateral to balance the risk to the SBA. You require no collateral for loans up to $25,000. However, for loans between $25,000-350,000, the SBA will have a variable collateral policy, and loans over $350,000 will be fully collateralized.
Pros and Cons of SBA 7a Loans for Small Business Owners
Among the various programs offered by the SBA, the 7a loan is considered the holy grail. Small business owners’ terms set by the SBA are competitive, flexible, and genuinely low-risk options. However, the risk to the SBA makes these loans highly desirable and challenging to apply.
Further, depending on your financial goals, the 7a may not be the best option for your business. However, if it is and you qualify, BitX Funding can streamline the application process and prepare you for your next SBA loan.
SBA Pros
- Flexible repayment period
- Competitive interest rates
- Specialized loans for various industries (exporting, minorities, military, for example)
- Longer terms and lower down payments than traditional loans
SBA Cons
- Eligibility may be an issue depending on your business track record
- Lots of paperwork with a drawn-out application process
- May require collateral terms for loans over $25k
Apply for an SBA 7a Loan Today
2022 brings exciting opportunities and also catastrophic global events. With the recent pandemic, the war in Europe, and a dynamic market, it’s challenging to know what might come next. At the same time, we’re experiencing a technological surge, unprecedented consumer awareness, and online shopping development.
The best way to stay on top of our dynamic world is to have a revenue stream ready for any occasion. Whether you’re maintaining your business during COVID-19 or looking to expand, having the right loan option is the key to success. While many options are available, the holy grail of small business loans is the SBA 7a loan. If you’re interested in applying and want expert advice on the loan process, contact BitX Funding today to get started.
