Can I Use the SBA 7(a) Loan for Equipment?

Have you tried to finance new equipment purchases yourself? Maybe you’ve gone to family and friends to ask for small loans. Maybe you’ve tried to obtain a personal loan, or have even thought about using credit cards. But the money you need just isn’t there—it’s like it doesn’t exist.

The SBA 7(a) loan is what you’re looking for: a government-backed loan that you can receive from a bank, credit union, or other lending institution that’s meant to help small businesses with real estate and working capital. And yes, you can use the SBA 7(a) loan for equipment purchases.

Industries That Qualify for the SBA 7(a) Loan

Before you start looking for an SBA 7(a) loan lender for your equipment, take a look at the eligibility requirements. First consider which industry you operate in, because certain industries don’t qualify for an SBA 7(a) loan. Ineligible industries include:

  • Bail bond
  • Gambling
  • Life insurance
  • Mining
  • Mortgage servicing
  • Oil wildcatting
  • Pawn or private clubs
  • Primarily political and lobbying activities
  • Real estate development
  • Religious teaching

Now, below are just a few examples of equipment you might buy within industries that do qualify for an SBA loan:

  • Accounting and financial: new computer systems, furniture, office equipment
  • Agriculture & agribusiness: tractors, generators, milking equipment
  • Construction: lifts, tools, safety gear, cranes and other machines
  • Education: subject textbooks, dry erase boards and electronic boards, utensils
  • Entertainment, arts, recreation, and sports: lighting and sound gear, uniforms, recording studio equipment
  • Hospitality and restaurants: ovens, hoods, other kitchen appliances
  • Information technology: fiber cable, software licensing, computer systems
  • Manufacturing: hydraulic machines, overhead cranes, waterjet and laser cutters
  • Media, broadcasting, and PR: AV gear, studio props and sets, makeup
  • Real estate: advertising materials (signage, flyers, etc.), staging furniture
  • Retail: POS systems, racks and shelves, office equipment
  • Telecom: phone systems, computer systems, desks and chairs
  • Transportation: fleet vehicles, forklifts and other loaders

How Does an SBA 7(a) Loan Work?

The government backs a number of loans that small U.S.-based businesses can get from a bank, credit union, or other lending institution. The SBA 7(a) loan is the most popular of these commercial loans.

People often assume that the SBA lends this money directly to businesses, but that’s not quite how it works. Instead, a bank or financial institution provides the loan, and the SBA guarantees it up to a certain amount. The money from the SBA 7(a) loan can be used for equipment, but also for real estate and other business purposes.

 Buying new business equipment with an SBA 7(a) loan

Borrower Requirements

There are some basic eligibility requirements for the SBA 7(a) loan:

  • 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 the SBA 7(a) loan.
  • The business owner cannot be on parole.
  • You must be doing business in the U.S. or its territories.

SBA 7(a) Loan Terms

Here’s a more detailed look at the SBA 7(a) loan terms:

SBA 7(a) Loan Terms

Loan Amount

Minimum No minimum
Maximum $5 million

Maturity

Real estate loans 25 years
Equipment 10 years
Working capital or inventory 10 years
Other No more than 25 years

Interest Rates (maturity less than 7 years)

$25,000 or less Base rate plus 4.25%
$25,000–$50,000 Base rate plus 3.25%
More than $50,000 Base rate plus 2.2%

Interest Rates (maturity more than 7 years)

$25,000 or less Base rate plus 4.75%
$25,000–$50,000 Base rate plus 3.25%

As you can see, the SBA 7(a) loan accommodates both large and small loans. There’s no minimum loan amount, and the maximum is a whopping $5 million. The Small Business Administration guarantees at least 75% of the loan, and the rates for the borrower are reasonable.

Finding the Perfect SBA 7(a) Lender

You can find an SBA 7(a) loan lender in most U.S. cities. Banks, credit unions, savings and loans companies, and specialized lenders can all operate as SBA 7(a) loan lenders. A good sign of an appropriate bank or credit union is if they are considered a Preferred Lender by the SBA. SBA Preferred Lenders have a track record of helping small businesses get loans efficiently and effectively.

Speak with SBA7a.Loans and let us help match you with a lender. We can give you the best opportunity to find a lender through our years of experience in working with small businesses and start-ups. Above all, we want to provide you with an educational platform to better familiarize yourself with the intricacies of the SBA 7(a) loan process.

SBA7a.Loans Can Help with Equipment Loans

At SBA7a.Loans, we live and breathe the SBA 7(a) loan process. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7(a) loan platform. We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to help you on your way to success. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude.

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