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Small Business and SBA Lending Blog
Last updated on Feb 19, 2023
3 min read

What Is the SBA 7(a) Standard Loan?

An SBA 7(a) Loan for over $350,000 is called a Standard Loan. These loans are eligible for SBA guarantees of up to 75%. It’s important to remember that while the SBA is backing the loan, traditional lenders such as banks and credit unions will actually loan you the money.

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

In this article:
  1. 7(a) Standard Loans: Worth the Wait
  2. SBA Standard Loans Allow Flexibility
  3. How Good Are My Chances of Getting an SBA 7(a) Standard Loan?
  4. Related Questions
  5. Get Financing

An SBA 7(a) Loan for over $350,000 is called a Standard Loan. These loans are eligible for SBA guarantees of up to 75%. It’s important to remember that while the SBA is backing the loan, traditional lenders such as banks and credit unions will actually loan you the money. This means that once the SBA approves you as an acceptable risk for their guarantee, your lender will be the final gatekeeper to actual loan approval. Lenders count on the SBA vouching for you, though, because an SBA guarantee reduces your lender's risk in financing you at otherwise unreasonable terms (from the lender's perspective).

And here's an interesting fact: without the SBA’s guarantee, around 80% of small business owners get denied for standard bank loans.

This is most likely why SBA 7(a) loans have become the most popular small business loan, making up nearly 80% of the total number of SBA loans just two years ago. The Standard Loan program has, in fact, become the “obvious choice” for small business owners. It only makes sense that the Small Business Administration would have the success of small businesses in mind; most types of for-profit small businesses meet SBA guidelines.

7(a) Standard Loans: Worth the Wait

While the approval process can take a minimum of three weeks, it’s been said to be worth the wait. SBA Standard Loans allow for lower down payments and longer repayment terms than your average bank loan, which benefits small businesses who may prefer to keep their cash flow for operational expenses instead of being weighed down repaying large debts. And because interest rates for SBA Loans are controlled by the government (they’ll cap it) an SBA Standard Loan will give you the most affordable interest rates.

Here are some additional benefits of the SBA 7(a) Standard Loan:

  • Up to 25 year terms

  • Fixed and variable rates

  • No balloon payments

The main difference between the SBA Standard 7(a) Loan and the 7(a) Small Loan has to do with collateral: once the loan amount is over $350,00 (as it is for the Standard Loan), the lender will no longer require a lien on the borrower’s fixed assets as well as the assets gained through use of the loan.

SBA Standard Loans Allow Flexibility

SBA 7(a) Standard Loans are also quite popular because nearly any reasonable business expense you can think of falls under the allowed uses in the 7(a) Loan program. They offer you a great deal of flexibility, which is important when small businesses tend to evolve more rapidly than larger, more established corporations. Standard Loans can be used “sound business purposes” such as general working capital, repairing capital, real estate, construction, inventory and supplies, business and manufacturing equipment, paying salaries until you turn a profit, and even for refinancing business debt.

How Good Are My Chances of Getting an SBA 7(a) Standard Loan?

Before applying, you’ll want to take a look at the following and do your own analysis. If anything seems lacking, you’ll benefit from beefing these credentials up before starting the process of applying for a loan and getting approved:

  • Your personal and business credit scores (personal preferred over 680)

  • How long your business has had its existing management

  • Your management teams’ industry experience and expertise

  • Sufficient cash flow in your business to allow you to repay your loan

  • Sufficient collateral to demonstrate your own investment in the business

  • A comprehensive business plan and sound financial projections

  • Enough working capital to allow your business to grow over the next 12 months

  • Satisfactory debt ratios

  • Absence of existing liens, judgments or bankruptcies

To learn more about the SBA 7(a) loan program or to get a free quote, simply click the button below!

Related Questions

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

The eligibility requirements for an SBA 7(a) loan include:

  • The business must meet the SBA's size standards for its particular industry.
  • The business must have fewer than 500 employees and less than $7.5 million in revenue each year for the previous three years.
  • The business must physically be based in the U.S. and operate within the U.S. and its territories.
  • The business must operate for profit.
  • Business owners must first have used other sources of financing, including personal funds, in order to qualify.
  • Businesses must not be involved in lending, real estate, or speculation.
  • Your business must operate for profit. Nonprofits and not-for-profit businesses are not eligible.
  • You must also have some equity in the business — this could mean you already have a profitable business, or you could use your own personal equity as collateral.
  • If you have any alternative financial resources, you must have used them first. For example, if you have a personal savings account or are able to get a personal loan, then you must first pursue those options before applying for an SBA 7(a) loan.
  • The business owner cannot be on parole.
  • You must be doing business in the U.S. or its territories.

What are the maximum loan amounts for an SBA 7(a) loan?

The maximum loan amount for an SBA 7(a) loan is $5 million. If you borrow the maximum, the SBA will be funding $3,750,000 of the loan and your private lender will cover the rest.

If you are looking for a larger loan, try SBA 504 loan calculator.

Your business can get an SBA 7(a) loan for any amount of up to $5 million. The loan has no minimum, which is good news for small businesses. (For example, in 2010, a small business in eastern Missouri obtained a $5,000 SBA 7(a) loan.) However, if you're thinking about taking out a smaller loan, it might be a good idea to check out one of the SBA's other loan programs -- like the 7(a) Small Loan or the Express Loan. Alternately, if you need more than the max amount of $5 million, the SBA 504 program or another loan is a better fit.

What are the interest rates for an SBA 7(a) loan?

The interest rates for an SBA 7(a) loan depend on the amount of the loan and the maturity of the loan. For loans with a maturity of less than 7 years, the interest rate is the prime rate plus 4.25% for loans of $25,000 or less, 3.25% for loans between $25,001 and $50,000, and 2.25% for loans of $50,001 and up. For loans with a maturity of more than 7 years, the interest rate is the prime rate plus 4.75% for loans of $25,000 or less, 3.75% for loans between $25,001 and $50,000, and 2.75% for loans of $50,001 and up. The current prime rate is 7.75% as of February 2023.

What are the repayment terms for an SBA 7(a) loan?

The repayment terms for an SBA 7(a) loan vary depending on the type of loan. For commercial real estate loans, the loan term is up to 25 years. For equipment loans, the loan term is up to 10 years. For working capital loans, the loan term is also up to 10 years.

Learn more: Understanding How the SBA Guarantees Loans

What are the fees associated with an SBA 7(a) loan?

The SBA 7(a) loan fees vary depending on the exact size of the loan. From $150,000 to $700,000, the fee is 3%. From $700,000 to $1 million, the fee is 3.5%. From $1 million to $5 million, the fee is 3.5%, plus an additional 0.25% for the amount over $1 million. Borrowers are also required to pay an annual service fee of 0.52% of the loan amount. Additionally, if you make an early payment on an SBA 7(a) loan within the first three years, you will be subject to a prepayment penalty. In the first year, the penalty is set at 5%. In the second year, it's set at 3%, and in the third year, the prepayment penalty declines to 1%.

For more information, please refer to the following sources:

  • Understanding the SBA 7(a) Loan Fees: Both for Borrowers and Lenders
  • SBA 7(a) Loans for Small Businesses
In this article:
  1. 7(a) Standard Loans: Worth the Wait
  2. SBA Standard Loans Allow Flexibility
  3. How Good Are My Chances of Getting an SBA 7(a) Standard Loan?
  4. Related questions
  5. Get Financing
Tags
  • SBA 7(a) Standard
  • SBA Loans
  • Eligibility

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