The SBA (7a) loan is a primary business loan program by the Small Business Administration to help small businesses secure commercial financing. It is one of the most common types of loan programs guaranteed by the SBA. The Small Business Administration (SBA) guarantees over 50,000 businesses each year through its SBA (7a) loan program. To be eligible for SBA (7a) loans, businesses must meet specific criteria; however, many small businesses, including those in real estate, qualify.
| Eligible Properties | Office, Retail, Medical/Healthcare, Hotel/Motel, Self-Storage, Warehouse/Industrial, Mixed Use, etc. |
|---|---|
| Maximum Loan Amount | up to $5,000,000 |
| Interest Rate | Prime + 2.75%. See LIBROR rates |
| Loan Term | Up to 25 years for commercial real estate |
| Maximum LTV | 85% for Loans up to $150,000 and 75% for Loans Over $150,000 |
| Minimum DSCR | 1.25x |
| Recourse | Typically Full-recourse. |
| Prepayment | Applicable for loans with maturities of 15 years or more if repaid during the first 3 years. (5% for year 1, 3% for year 2 and 1% for year 3) |
| SBA guaranty fees | 3.5% on loans above $700,000, up to $1 million, plus 0.25% on guaranty portion over $1 million |
| Collateral | For SBA loans over $350,000, lenders must collateralize the loan to the maximum extent possible, and owners with 20% or higher stake in the business must provide personal guarantees. |
SBA (7a) loans offer a range of benefits that make these loans a lucrative option for eligible small businesses.
Though SBA (7a) loans offer many advantages, they also have some drawbacks and, therefore, they may not be suitable for certain situations.
Contact us to get a no-obligation, personalized quote that shows the top available lenders and the best available rates for your commercial real estate investment.
