SBA 7(a) Loans for Manufacturers
In the United States, the manufacturing industry employs more than 12 million people— and produces nearly 20% of all the world’s goods. If you own and operate a manufacturing company, and you want funds to expand your firm, build a new headquarters, acquire a competitor, or even refinance your busin
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesIn the United States, the manufacturing industry employs more than 12 million people— and produces nearly 20% of all the world’s goods. If you own and operate a manufacturing company, and you want funds to expand your firm, build a new headquarters, acquire a competitor, or even refinance your business’s debt, an SBA loan like the SBA 7(a) loan could be a fantastic option.
SBA 7(a) Loans and the Manufacturing Industry
While the SBA 7(a) program may be great choice for many manufacturing firms, they may not necessarily be easy to get. First, it’s important to make sure that your firm is within the SBA’s size limits for your specific sub-industry (in most cases, it will be, since the maximum size for a “small” business is actually pretty big.) For example:
Breakfast Cereal Manufacturing: Maximum 1000 employees
Cheese Manufacturing: Maximum 1,250 employees
Knit Fabric Mills: Maximum 500 employees
Cut and Sew Apparel: Maximum 750 employees
Petrochemical Manufacturing: Maximum 1,000 employees
Heating Equipment: Maximum 500 employees
SBA 7(a) Loan Uses for Manufacturing Businesses
When it comes to manufacturing firms, the SBA 7(a) loan can be used for a variety of purposes, including:
Buying out a competitor: If you’d like to acquire a competitor’s business, you may be able to use a SBA 7(a) loan to do so. These loans can also be used to buy out business partners or, in some cases, passive investors in a business.
Buying or building a new manufacturing facility: SBA 7(a) loans provide terms of up to 25 years for commercial real estate loans, and can also be used to finance all aspects of the construction process.
Buying manufacturing equipment: SBA 7(a) loans can be used to finance the purchase of heavy equipment, usually with up to 10-year terms.
Debt refinancing: If you want to refinance business debt, you can also do so with an SBA 7(a) loan. In most cases, however, the debt must currently have unreasonable terms, and must have been used to fund business purchases (not personal expenses.)
Working capital: Whether it’s B2B or B2C marketing, paying employee salaries during a rough patch, or simply keeping the office stocked with new supplies, an SBA 7(a) loan can provide the short-term capital that a manufacturing business needs. However, businesses looking for a revolving line of credit, especially those that face cyclical/seasonal sales cycles, may be better served by the SBA CAPlines program.
Related Questions
What are the eligibility requirements for SBA 7(a) loans for manufacturers?
The SBA 7(a) loan program is a great choice for many manufacturing firms, however, they may not necessarily be easy to get. To be eligible, your firm must meet the SBA's size limits for your specific sub-industry. For example, for breakfast cereal manufacturing, the maximum number of employees is 1000, for cheese manufacturing, the maximum number of employees is 1250, for knit fabric mills, the maximum number of employees is 500, for cut and sew apparel, the maximum number of employees is 750, for petrochemical manufacturing, the maximum number of employees is 1000, and for heating equipment, the maximum number of employees is 500. Additionally, for non-manufacturing industries, the maximum average annual receipts must be under $7.5 million. You can find more information about size requirements for your specific industry here. You can also learn more about eligible and ineligible industries here.
What are the advantages of SBA 7(a) loans for manufacturers?
The SBA 7(a) loan program offers a variety of advantages for manufacturers, including:
- The ability to buy out a competitor, business partner, or passive investor.
- The ability to buy or build a new manufacturing facility.
- The ability to buy manufacturing equipment.
- The ability to refinance business debt.
- The ability to access working capital.
These loans also offer terms of up to 25 years for commercial real estate loans, and up to 10-year terms for equipment purchases. For businesses looking for a revolving line of credit, the SBA CAPlines program may be a better option.
What are the disadvantages of SBA 7(a) loans for manufacturers?
SBA 7(a) loan disadvantages for manufacturers include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
- Manufacturers must meet the SBA's size limits for their specific sub-industry (https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf)
What documents are required to apply for SBA 7(a) loans for manufacturers?
To apply for an SBA 7(a) loan for manufacturers, you will need to provide the following documents:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Business and affiliate financial statements, including a balance sheet, profit and loss, and income projection
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan
The SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is. The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.
What is the maximum loan amount for SBA 7(a) loans for manufacturers?
The maximum loan amount for SBA 7(a) loans for manufacturers is $5 million. The SBA will fund up to $3,750,000 of the loan and the private lender will cover the rest. If you are looking for a larger loan, you can try an SBA 504 loan calculator.