Finances and Taxes

The SBA Standard 7(a) Loan: Flexible Financing for Small Businesses

Feli Oliveros  

The 7(a) loan program is the Small Business Administration’s (SBA) most popular program for eligible businesses that need financial assistance. 

While the SBA doesn’t lend money to businesses directly, it does guarantee a portion of the loan amount. This ensures that lenders see applicants as less of a risk and encourages them to offer more attractive loan terms—terms that some borrowers wouldn’t be able to get otherwise. 

The 7(a) program is made up of nine loans with different uses, terms, and conditions, because each one is designed to meet certain needs. However, as you read on, you’ll find that the SBA Standard 7(a) Loan covers the funding needs for most small business owners.

What is the SBA Standard 7(a) Loan?

The Standard 7(a) Loan is the one that most people mean when they refer to the SBA 7(a) loan. 

More small businesses will qualify for this loan than any other one in the 7(a) program, thanks to a relatively broader set of qualifications. The program is still managed by a federal government agency, though, so the application process takes some work and funding may take longer than with other lenders. 

But compared to other 7(a) loans—and many other business financing options—the Standard 7(a) Loan offers more attractive terms and can be used for a wider variety of purposes, making it the preferred option for many small business owners in need of funding. 

The SBA Standard 7(a) Loan at a glance

  • Maximum loan amount: $5 million
  • Maximum SBA guarantee: 85% for loans up to $150,000 and 75% for loans over $150,000
  • Interest rate: Negotiable, but it cannot exceed the SBA maximum (determined by the market prime rate plus a markup of less than 3%)
  • Turnaround time: 5–10 business days 
  • Funding time: 30–90 business days
  • Repayment terms: Up to seven years for working capital, 10 years for equipment, and 25 years for real estate
  • Collateral: Collateral is not required for loans up to $25,000. For loans over $25,000, lenders must follow their internal collateral policies for non-SBA loans. If the business’s assets don’t cover the collateral needed, the lender may use the business owner’s personal assets to cover the difference. 
  • Fees: Lenders cannot charge unnecessary fees, but the SBA allows for packaging fees, loan guarantee fees, late fees, and prepayment penalties (for loans with terms of 15 years or longer that are paid off within the first three years). 

What can the SBA 7(a) Standard Loan be used for?

Eligible small businesses can apply for up to $5 million through the Standard Loan and put it toward a variety of business needs.

The high loan ceiling makes it a viable choice for businesses that need to fund construction projects or real estate purchases, but it can also be used for:

  • Long- and short-term working capital
  • Business debt refinancing
  • Purchases of equipment, furniture, fixtures, inventory, and supplies

Eligibility requirements for the SBA 7(a) Standard Loan

All applicants must meet a number of basic requirements set by the SBA stating businesses must:

  • Be registered as a for-profit business 
  • Meet the SBA’s definition of a small business and 7(a) loan program eligibility requirements
  • Be located in and operate (or propose to do so) in the US or its possessions
  • Have reasonable invested equity to show their commitment to the business
  • Not have alternative financial resources available, including a significant amount of discretionary personal funds or assets, when applying for a loan
  • Demonstrate a need for a loan
  • Prove that you’ve tried and failed to get loans with reasonable terms from other lenders
  • Use the money for an approved purpose
  • Not be delinquent on any existing debt obligations to the US government

On top of that, some lenders may have an additional set of qualifications. Some of the most common ones include:

  • Annual business revenue of $100,000 or more
  • A sensible business plan, as well as industry and management experience
  • A FICO credit score of at least 650
  • Valuable assets to put down as collateral

This last set of qualifications can be thought of as recommendations rather than requirements, since applications are assessed on a case-by-case basis. For example, a newly-licensed startup may not have any revenue at all, but a strong business plan and excellent personal credit can turn its application into a less risky proposition for the lender.

How to apply for the SBA 7(a) Standard Loan

If you meet the SBA’s eligibility requirements, you must gather the appropriate documents (more on this in the following section) before you can work on the loan application with your lender. 

Then, you’ll need to find a lender you want to work with. An easy way to do this is through the SBA’s Lender Match page or its list of most active lenders. The best lenders are usually ones that issue large numbers of SBA loans, because they have more experience with the process and are therefore more likely to continue approving them. 

Once you choose a lender, you’ll want to inquire about any unique eligibility requirements they have and adjust your loan packet accordingly. Turn in your completed loan applicationpackage to your lender, and they’ll then turn it in to the SBA.

You can expect a response on your application within five to 10 business days. If you’re approved, you’ll sign your loan contract and receive your funds, typically within 30 to 90 days after your application is approved. 

Your SBA 7(a) Standard Loan application checklist

  • SBA loan application form (SBA Form 1919)
  • Statement of personal history (SBA Form 912)
  • Personal financial statement (SBA Form 913)
  • Up-to-date business profit and loss (P&L) statement and supplementary schedules from the last three fiscal years
  • A detailed one-year projection of the business’s income and finances, as well as a written explanation of how it will be achieved
  • A list of ownership and affiliation disclosures
  • Business certificate or license
  • Loan application history
  • Personal and business federal income tax returns from the past three years
  • Personal resume
  • Business plan, including why the loan is needed and what it will be used for
  • Business lease (if applicable)

The SBA Standard 7(a) Loan offers some of the best loan terms available for well-established small businesses and newly-minted startups alike. However, it may not be a great fit for everyone, such as those who don’t meet the SBA’s strict requirements or business owners in need of quick cash for critical operations. 

Don’t worry if this particular loan doesn’t work for you, though. You still have a wide variety of financing options available to you. Take some time to explore alternatives like business credit cards, online loans, and lines of credit and see if they fit with your business plan and financial situation.

Feli Oliveros
Feli Oliveros Feli Oliveros is a freelance finance and business writer with experience covering personal and small business finance. In 2015 she graduated from UCLA, where she earned her bachelor’s degree in English and minored in Anthropology.
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