Tap to get financing
SBA 7(a) Loans
SBA 7(a) Loans
Uses for the SBA 7(a) LoanCompare SBA LoansFund a StartupBuy EquipmentGet a Commercial MortgageRepair CapitalRefinance Business DebtGet a Working Capital LoanBuy a BusinessLearn About the SBA Lending ProcessFind an SBA Lender
Requirements Rates Loan Calculator
SBA Tools
SBA 7(a) Loan CalculatorSBA 504 Loan Calculator
Blog
About Us
About usContact us
Get financing
Close sba7a.loans is an independently owned and operated website and has no government affiliation. We are not the Small Business Administration and are not a lender. If you are trying to reach the SBA click here to be redirected.
Newly Published
Oct 27 at SBA 7(a) Loans
Small Business Loans Guide: Before You Start
Aug 26 at SBA 7(a) Loans
Who Are Specialized Lenders in the SBA 7(a) Loan Program?
Aug 26 at SBA 7(a) Loans
Writing a Proposal for the SBA 7(a) Loan
Explore the Janover Network
Mar 31 at Commercial Real Estate Loans
7 Reasons Multifamily Should Be in Your CRE Portfolio
Mar 29 at Commercial Real Estate Loans
The Advantages and Risks of Buying Distressed Properties
Mar 28 at Multifamily Loans
Why Smaller, "Boutique" Apartment Buildings Can Be Great Investments
Was This Article Helpful?
Small Business and SBA Lending Blog
Last updated on Feb 19, 2023
2 min read

Are SBA 7(a) Loans Assumable?

Fortunately for borrowers, SBA loans, including the SBA 7(a) loan , are fully assumable with SBA approval. However, if you’re selling your business, getting approval from the SBA for another borrower to assume your loan can be somewhat complex. In particular, the SBA will look to ensure that the ne

Apply for a loan in minutes and get multiple quotes today → Get Quotes

Fortunately for borrowers, SBA loans, including the SBA 7(a) loan, are fully assumable with SBA approval. However, if you’re selling your business, getting approval from the SBA for another borrower to assume your loan can be somewhat complex. In particular, the SBA will look to ensure that the new borrower is eligible under SBA guidelines, and has enough financial strength and business experience to make a potential loan default unlikely.

What are the Requirements for Assuming an SBA 7(a) Loan?

The SBA will carefully examine a borrower trying to assume a current SBA 7(a) loan, ensuring that they meet a variety of requirements. These include:

  • Being an SBA-eligible borrower under the most recent SBA guidelines

  • The individual assuming the loan needs to be the primary owner of the business, and should have equal or better business experience/management skills than the current borrower

  • Good credit (usually 680+)

  • Having the financial strength to fully repay the loan

  • A written agreement stating all terms of the loan assumption must be created and signed by all parties

  • The agreement needs to have a “due on sale or death” clause, which will prevent any further assumption of the SBA 7(a) loan

  • Collateral must not be released during the assumption process, and the assumption process should not reduce the value of any current loan collateral

  • The assumption must not have a negative financial impact on the business

  • The seller must not keep the title of the property as collateral/loan security (i.e. no real estate contracts)

Related Questions

Is it possible to assume an SBA 7(a) loan?

Yes, it is possible to assume an SBA 7(a) loan. The SBA will carefully examine a borrower trying to assume a current SBA 7(a) loan, ensuring that they meet a variety of requirements. These include:

  • Being an SBA-eligible borrower under the most recent SBA guidelines
  • The individual assuming the loan needs to be the primary owner of the business, and should have equal or better business experience/management skills than the current borrower
  • Good credit (usually 680+)
  • Having the financial strength to fully repay the loan
  • A written agreement stating all terms of the loan assumption must be created and signed by all parties
  • The agreement needs to have a “due on sale or death” clause, which will prevent any further assumption of the SBA 7(a) loan
  • Collateral must not be released during the assumption process, and the assumption process should not reduce the value of any current loan collateral
  • The assumption must not have a negative financial impact on the business
  • The seller must not keep the title of the property as collateral/loan security (i.e. no real estate contracts)

What are the requirements for assuming an SBA 7(a) loan?

The SBA will carefully examine a borrower trying to assume a current SBA 7(a) loan, ensuring that they meet a variety of requirements. These include:

  • Being an SBA-eligible borrower under the most recent SBA guidelines
  • The individual assuming the loan needs to be the primary owner of the business, and should have equal or better business experience/management skills than the current borrower
  • Good credit (usually 680+)
  • Having the financial strength to fully repay the loan
  • A written agreement stating all terms of the loan assumption must be created and signed by all parties
  • The agreement needs to have a “due on sale or death” clause, which will prevent any further assumption of the SBA 7(a) loan
  • Collateral must not be released during the assumption process, and the assumption process should not reduce the value of any current loan collateral
  • The assumption must not have a negative financial impact on the business
  • The seller must not keep the title of the property as collateral/loan security (i.e. no real estate contracts)

What are the benefits of assuming an SBA 7(a) loan?

The SBA 7(a) loan program offers several benefits to small businesses, including:

  • Flexibility in underwriting
  • Often has lower interest rates than other comparable financing options
  • Long loan terms, up to 25 years for real estate, 10 years for equipment, and 10 years for working capital or inventory
  • Flexible collateral requirements
  • Lenders are prohibited from charging certain fees, including insurance service fees, add-on interest charges, legal service fees (with some exceptions), and broker referral fees
  • No prepayment penalty for shorter-term loans
  • No balloon payment
  • Improved cash flow for the business
  • Can be used for various business purposes, including renovations, capital purchase, seasonal lines of credit, or refinancing of existing debt

For more information, please visit https://www.sba.gov/category/lender-navigation/sba-loan-programs/7a-loan-programs and https://www.sbaexpress.loans/sba-express-glossary/what-is-an-sba-7-a-loan.

Are there any risks associated with assuming an SBA 7(a) loan?

Yes, there are risks associated with assuming an SBA 7(a) loan. These risks include lengthy approval times, lots of documentation, collateral requirements, restrictions on certain businesses, high credit scores, and restrictions on supplemental/additional financing.

For more information, please see the following sources:

  • What is an SBA 7(a) Loan?
  • What are the Pros and Cons of SBA 7(a) Loans?

What are the steps involved in assuming an SBA 7(a) loan?

Assuming an SBA 7(a) loan involves the following steps:

  • Being an SBA-eligible borrower under the most recent SBA guidelines
  • The individual assuming the loan needs to be the primary owner of the business, and should have equal or better business experience/management skills than the current borrower
  • Good credit (usually 680+)
  • Having the financial strength to fully repay the loan
  • A written agreement stating all terms of the loan assumption must be created and signed by all parties
  • The agreement needs to have a “due on sale or death” clause, which will prevent any further assumption of the SBA 7(a) loan
  • Collateral must not be released during the assumption process, and the assumption process should not reduce the value of any current loan collateral
  • The assumption must not have a negative financial impact on the business
  • The seller must not keep the title of the property as collateral/loan security (i.e. no real estate contracts)

In addition, the business must meet the SBA's eligibility requirements, such as operating in the United States or within a U.S. territory, not being on parole, and not being a non-profit organization. The business owner must also exhaust other financial options before seeking out a 7(a) loan, such as liquidating extra houses or cars, or receiving a traditional loan. Certain industries are ineligible to receive SBA funding, such as speculation-based ventures, gambling, and others. Learn more about eligible and ineligible industries here.

Tags
  • SBA 7(a) Loans
  • SBA Loans
  • SBA 7(a)
  • SBA Business Loans
  • SBA 7(a) Loan Assumability
  • SBA Assumable Loans

Getting a small business loan should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

SBA 7(a) Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

hello@sba7a.loans

SBA 7(a) Loans

SBA Loan Comparison
SBA 7(a) Loan Fees, Rates, and Terms
Qualifying for an SBA 7(a) Loan
SBA Loan Guides per State

Site Information

Privacy Policy
Terms of Use
Advertiser Disclosure

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We are a technology company that uses software and experience to bring lenders and borrowers together.

All users should perform their own due diligence and research. Nothing on this website is an offer or a solicitation for a loan. This website does not endorse or charge you for any service or product. None of the information on this site constitutes legal advice. We are not affiliated with the Small Business Administration (SBA). If you need to visit the SBA directly please click here: sba.gov

Click here for our Advertiser Disclosure.

Copyright © 2023 Janover Inc. All rights reserved.