SBA 7(a) Loans


If you’re looking to expand your business, you’ve probably already done some research on different financing options out there.

While wading through the various financing choices presented to you, there’s no doubt that you’ve found some not-so-appealing options. Some have terrible terms, don’t offer a lot of money, or give you insanely high-interest rates.

SBA 7(a) loans can be a great recourse in a world full of poor financing options.

The SBA 7(a) loan offers to fund up to $5 million, has very manageable interest rates, and repayment conditions that won’t stress you out or break the bank.

The SBA 7(a) loan is a fantastic option for a small business owner!

In this article, we’ll explain how SBA 7(a) loans work, how you can qualify and apply for them, how they can be used, how you can pay them back, and more.

Let’s dive in.

SBA 7(a) Loans: How they work

The SBA 7(a) loan is one of many financial assistance programs offered by the SBA (Small Business Administration).

This program provides small businesses a way to get loans on terms that work for them, with fair and manageable conditions.

However, the SBA isn’t the entity that loans you the money.

Instead, the SBA guarantees a portion of the loan (up to 85% depending on the lender and the size of the loan) and works with an SBA-partner lender. That partner-lender is the person who issues the loan.

Your repayment terms will generally be seven years for loans related to working capital financing, ten years for financing equipment purchases, and 25 years for real estate.

The SBA will set a capped interest rate once you find a lender, but this interest rate is not set in stone—you and your lender can negotiate as you see fit.

Types of SBA 7(a) Loans

Many SBA 7(a) loans exist for specific needs, conditions, and available terms.

Here’s a brief overview of each type, as well as a table that outlines the key characteristics and differences between each type.

SBA 7(a) Standard

These loans have quick turnaround times, a maximum loan amount of $5 million, and guarantees of up to 85% for loans smaller than $150,000. Loans above $150,000 usually get guarantees of around 75%.

Collateral is required for loans exceeding $25,000. This may be in the form of your business’s assets or personal property, especially if your business lacks the capital or assets to meet the collateral’s amount.

SBA 7(a) Small Loan

These loans offer a maximum of $350,000.

This loan is identical to the standard package, just with this smaller max amount.

It shares the same collateral requirement and the same guarantee percentages at the same loan amounts.

SBA Express

As the name implies, the SBA express loan is delivered quickly.

While other SBA loans have turnaround times between 5-10 days, the express loan has a turnaround time of just about 36 hours.

This quick turnaround time comes at the cost of only a 50% guarantee by the SBA.


CAPLines is an SBA program that helps small businesses reach their short-term needs.

There are 4 CAPLines available:

  1. Seasonal CAPLines is used for seasonal increases of accounts receivable and inventory purposes.
  2. Contract CAPLines are used for labor and material costs.
  3. Builder’s CAPLines finance contractors.
  4. Working Capital CAPLines is for businesses that fail to meet long-term credit standards.

SBA Export Working Capital

These loans are for businesses that generate export sales. These loans are used to support those sales.

Like standard SBA 7(a) loans, these loans can reach up to $5 million.

SBA Export Express

This SBA 7(a) option has a turnaround time of around 24 hours and is meant to be an efficient way for exporters to receive financial support.

These loans present a $500,000 limit.

SBA Veterans Advantage

This loan type is specifically for military veterans, active-duty members, or national guard members. You’ll also qualify for this type of loan if you’re married to a person in one of these groups.

Any small business at least 51% owned by someone of the mentioned groups can qualify.

SBA Veterans Advantage loans come with reduced fees and better rates to support these groups!

Comparison Chart for SBA 7(a) Loans

SBA 7(a) Loan Type Max Loan Amount Max SBA Guarantee Interest


Turnaround time Additional Information
SBA 7(a) Standard $5M 85% up to $150K 

75% for loans exceeding $150K 

Negotiable, cannot exceed max set by SBA 5-10 business days N/A
SBA 7(a) Small $350K 85% up to $150K 

75% for loans exceeding $150K

Negotiable, cannot exceed max set by SBA 5-10 business days N/A
SBA Express $500K 50%  Negotiable, cannot exceed the maximum set by SBA Max 36 hours N/A
CAPLInes $5M 85% up to $150K 

75% for loans exceeding $150K

Negotiable, cannot exceed max set by SBA 5-10 business days 4 different types

Rates, loan amounts, and specific guarantee percentages will vary based on the type

SBA Export Working Capital $5M 90% – varies with other factors and value of a loan  Negotiable, no set SBA limit  5-10 business days N/A
SBA Export Express $500K 90% up to $350K

75% for loans exceeding $350K

Negotiable, cannot exceed max set by SBA Max 24 hours N/A 
SBA Veterans Advantage $5M 85% up to $150K 

75% for loans exceeding $150K

Negotiable, cannot exceed max set by SBA 5-10 days At least 51% of businesses owned by Veteran or related group 

Certain fees waived 

How to qualify for an SBA 7(a) Loans

An SBA 7(a) loan requires a few qualifications to ensure your eligibility for financing.

Your business, first of all, needs to be registered as a for-profit business and operate in the U.S. The SBA does not provide these loans to nonprofits, political businesses, gambling businesses, life insurance companies, or passive income businesses.

Your business must also be considered a “small business.” This means your business’ net worth cannot exceed $15M and an after-tax profit of $5M over two years. Contact the SBA if you’re unsure about the size of your business and need clarification.

There are also time qualifications that the SBA and lenders tend to look at. While there is no concrete rule, it helps if your business has been in operation for a minimum of 6 months, and it helps if you have a history of business ownership.

Other factors that affect eligibility are your credit score (650+ is ideal), annual revenue of at least $100K to show profitability, business plans to show how you plan to use your loan, and enough collateral to cover your loan.

How to use an SBA 7(a) Loan

Remember that SBA 7(a) loans are used to finance specific goals. You can’t just use the money however you want!

Here’s the gist of it.

SBA 7(a) loans can be used for:

  • Working Capital (short-term)
  • Inventory and Equipment
  • Purchasing real estate or land for your business
  • Expansion and renovations for your business

SBA 7(a) loans cannot be used for:

  • Nonprofits, political businesses, gambling businesses, life insurance companies, or passive income businesses
  • If you take an export express or export working capital loan, you cannot use the loan for non-export businesses

How to apply for an SBA 7(a) loan

Now that you’ve learned a bit more about the SBA 7(a) loan program, you’re probably wondering how to apply.

Here are the steps!

  1. Understand if you qualify

The very first step of applying for an SBA 7(a) loan is understanding whether or not you qualify.

Is your business considered “small?”

Is your use-case for the loan permitted by the loan?

If you do qualify, do some calculating to see how much financing you need and what SBA guarantee bracket you’ll fall into.

  1. Gather necessary documentation

There are quite a few forms you’ll need to complete the application process, so make sure you organize everything well and document everything correctly.

Aside from SBA forms that you’ll find on their site or that a lender will direct you to, you’re going to need financial statements such as your balance sheets, business plans, cash flow statements, and income tax for your business. Be sure to have your business license as well.

The SBA and lenders will also require you to submit your tax returns and information regarding your collateral, if applicable.

Your collateral can be anything from real estate to inventory, but the amount you’ll need to put up will be based on the size of your loan.

  1. Find a Lender

Finding a quality lender that meets your needs is incredibly important. Although the SBA can help you in your search, do your research on the various options.

Loanbase takes the guesswork out of finding a lender with offerings tailored to your needs.

  1. Submit your application and closing

Once you have all your documents in check, you’re ready to submit your application!

The turnaround time will depend on your type of loan (and lender), but 5-10 days is standard. Express loans will close much faster.

If your loan is approved, great!

You may need to take a few final closing steps, such as presenting your collateral or paying off certain processing fees. Once that’s all sorted out, you can go over your repayment plan and ask any final questions.

How to pay back your SBA 7(a) loan

Part of acquiring your SBA 7(a) loan will be accepting your repayment plan.

While there may be minor differences between each SBA 7(a) loan type, repayment plans follow the same basic format.

You’ll repay your loan with monthly payments, and you’ll be given an end date for payments. That’s it!

However, keep in mind that if you want to prepay your loan, you will face prepayment penalties unless the loan is less than a 15-year term.

These prepayment penalties will vary from lender to lender.

Sample SBA 7(a) loan terms

Type of SBA 7(a) Loan  Standard 
Maximum Amount $3,500,000
Guarantee % 75%
Guarantee Fee 3.5% of Guarantee 
Timeline 25 years 
Interest Rates Prime + 2.65%
Additional Fees Processing – 1% 

Closing – 0.2% 

Advisor – 0.4%

Use of Proceeds  Purchasing real estate to expand business 
Required Equity $2 600 000
Collateral (if required) Personal residential property of Principal 

SBA 7(a) loans vs SBA 504 loans

Check out this table for a quick overview of the differences between 7(a) loans and 504 loans.

SBA 7(a) SBA 504
Loan Size $5 million max $5 million max
Interest Rate Fixed and variable rates are both available – can be negotiated Fixed rates for the duration of the loan
Terms 7 years for working capital

10 years for business acquisitions and equipment

25 years for real estate  

10, 20, and 25 years
Fees  Based on the guaranteed dollar amount and included in the value of the loan  Based on debenture and included in the value of the loan

Pros and Cons of SBA 7(a) loans

As per most loan options out there, there are pros and cons to choosing SBA 7(a) loans:

Pros of SBA 7(a) Loans

  • Low-Interest Rates
  • Variable term lengths make it easier to keep up with payments at reasonable rates
  • Wide range of eligibility for a variety of businesses
  • Various SBA 7(a) options for specific needs and situations

Cons of SBA 7(a) Loans

  • High collateral requirements (collateral is almost always necessary past $25,000 loans)
  • The application process takes a long time to complete
  • Stringent qualifications—a high credit score and a certain amount of annual income required for approval


Is it hard to get an SBA 7(a) loan?

While not necessarily difficult, the application process can feel drawn out.

The only difficult part of getting an SBA 7(a) loan is meeting certain requirements, such as having a relatively high credit score and certain annual income.

If you do meet these qualifications, it’s a walk in the park!

Should I take out an SBA 7(a) loan?

It depends on your financial situation.

SBA 7(a) loans are fantastic and can be used in various circumstances to help small businesses grow.

What are the differences between SBA 7(a) loans and SBA 504 loans?

SBA 7(a) loans and SBA 504 loans have two major differences: use cases and the way they get you financing.

While SBA 7(a) loans can be used for working capital, equipment, or real estate, 504 loans cannot be used for working capital.
In regards to how they actually get you your loan, 7(a) loans work with a single lender. The SBA guarantees a portion of the loan to get you rates and financing you otherwise wouldn’t be able to get yourself.

The 504 loan program partners you with both a lender and a CDC partner who loan you up to 90% of the value of whatever loan you need.

Each has its own rates and terms you must acknowledge.

Will SBA 7(a) loans be forgiven?

There have been various layers of debt relief that the SBA has utilized in the past, and some are currently active.

From the Economic Aid Act of 2021, which provided 3 months of debt forgiveness for loans, to the COVID-19 relief program for businesses impacted by the pandemic, the SBA constantly provides ways to alleviate the financial stress of their borrowers.

Final Thoughts

The SBA 7(a) loan program offers great rates, multiple repayment term options, is easily accessible, and comes in various forms to provide financing to a great number of small businesses.

It’s an amazing option for those looking for financing. With the SBA guaranteeing your loan, you can expect terms that you won’t find anywhere else!

If you need help looking for a lender, look no further than Loanbase!

By matching you with a lender specified to you’re looking for, we provide a simplified and efficient way to navigate the loan market.


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