The Small Business Administration (SBA) offers business owners multiple loan programs. One of the primary programs is a SBA 7(a) loan program. Business owners like yourself use this loan to fund startups, expand, and cover operational costs. However, many business owners do not fully comprehend what the application process entails. To familiarize yourself with the application process, read this step-by-step guide on how to apply to the SBA 7(a) loan program.
Meet The Requirements
To be eligible for a SBA 7(a) loan, there are a few basic requirements that should be met. Foremost, ensure you meet the SBA definition of a small business. Generally, this applies to companies under 500 employees or with less than $7.5 million in annual sales. Engage in an industry that is deemed eligible by the SBA, such as retail, a restaurant, or hospitality. Make it evident you are a for-profit business seeking to do business in the United States. Lastly, be able to demonstrate a need for the loan concisely and as a sound business purpose. Meet these basic requirements, and you can feel confident to apply for a SBA 7(a) loan. Then, you can receive the business purchase loans you need to operate your company successfully.
Choose A Type Of SBA 7(a) Loan
After meeting the key business loan requirements to apply, you need to determine which type of SBA 7(a) loan you want to obtain. There are 5 different types of SBA loans you can apply for, each with varying loan amount limits and approved loan guarantees. The Standard 7(a) Loan has the highest loan amount of $5 million, with a guarantee of receiving 85% the desired loan amount if approved. A 7(a) Small Loan maxes out at $350,000, with a scaled guarantee of 85-75%. SBA Express loans have the same loan amount as the 7(a) Small Loan, but have only a 50% guarantee. Export Express loans offer a higher loan limit of $500,000, and a higher scaled guarantee of 90-75%. The final 7(a) loan program is the Export Working Capital. Reserved for businesses that generate export sales, this has a maximum loan amount of $5 million, with a 90% guarantee. Once you have narrowed down which 7(a) loan you need, you can begin the application process.
Complete Relevant App Forms
The next step of the process is to locate and complete the relevant application form for the 7(a) loan you wish to obtain. All SBA 7(a) loan program applications are available online via the SBA.gov website. In your application, you will need to demonstrate your business’ purpose, necessity for a loan, and provide evidence that you fulfill all the requirements. The best way to prepare for your application is to download the file and review it several times. If you familiarize yourself with the application form and prepare your answers, applying for this SBA loan program should be a walk in the park.
Understand Your Part Of The Process
The process for obtaining a SBA 7(a) loan is fairly consistent, regardless of loan type. After you determine which 7(a) loan you need, fill out the relevant application. The SBA and their lenders will complete a pre-screen credit check before any decision is made. The better your credit, the more likely you are to receive your loan. It is possible to pre-qualify for the credit check online. If time is of the essence, this might be advantageous. Once your application is sent in, the process is no longer in your hands.
Familiarize Yourself With Approval Times
The timeline when applying for SBA loan programs can vary. Depending on the type of 7(a) loan, you can receive approval in as little as 24 hours. Other times, it may be greater than 2 weeks before your application is reviewed and responded to. Aside from the Express Loan options, the SBA estimates an average 5-10 business days to review and respond to applications. Be patient when you apply for your SBA 7(a) loan. Some business owners wait over a week to hear back while others receive word within the same day. Familiarize yourself with the various approval times to properly prepare for the SBA 7(a) loan application process.
It’s common sense to understand how to apply for a SBA 7(a) loan before you do so. Ensure your small business meets the eligibility requirements before you waste any time. If the shoe fits, determine which loan program is right for you among the 7(a) family. Obtain the relevant application forms, and familiarize yourself with them. Complete the forms when you are ready and prepared for any credit checks. Once you apply, the only thing you can do is wait for approval. Ideally, you will obtain the SBA 7(a) loan quickly and on the first attempt. To ensure the greatest chance of success, become an expert on how to apply for a SBA 7(a) loan.