SBA 7(a) loan 7(a)

A participating lender makes the loan and the agency guarantees a percentage of it. The guarantee percentage steps down as loan size rises, and the lender pays a guaranty fee that is commonly passed through to the borrower. Pricing is a base rate — typically prime or an SBA-published equivalent — plus a spread the lender negotiates within an agency-set ceiling, so the rate floats with the base index unless the parties fix it.

What sets the maturity

Use of proceeds drives term length, not borrower preference. Owner-occupied commercial real estate carries the longest maturities, equipment sits in the middle, and working capital the shortest. A loan with mixed uses gets a blended maturity weighted by how the money is allocated. Longer amortisation is most of the reason a 7(a) payment is survivable where a conventional term loan's would not be.

What the lender will require

Owners at or above a threshold ownership stake — commonly 20 percent — give unlimited personal guarantees. The lender takes available business collateral and, where business collateral is short, will generally look at a lien on owner-occupied real estate under agency collateral rules. Tax transcripts are pulled and compared to the returns you submitted. Life insurance assignment appears on loans where the business depends on one person.

Underwriting is slower and more documentary than any private-market product in this glossary: interim financials, debt schedule, projections on acquisitions, business valuation where goodwill is being financed, and for acquisitions a purchase agreement and often a standby seller note.