A 7(a) Term Loan may be used for most business purposes including working capital, inventory, equipment purchases, refinance of debt not currently on reasonable terms, expansion , or real estate acquisition or improvement.*
Specific loan uses and terms are:
- Inventory and Permanent Working Capital: 5 to 10 years
- Equipment: 7 to 10 years
- Leasehold Improvements: 15 years
- Real Estate*: 15 to 25 years
A 7(a) Term Loan can finance up to 90% of real estate*, and up to 100% of equipment purchases and working capital.
Generally, the SBA will guaranty 85% of loans $150,000 or less, and 75% of loans greater than $150,000. The maximum loan amount is $5 million with a maximum guaranty amount of $3.75 million. Some exceptions may apply. SBA also charges a guaranty fee which is based on the loan amount and maturity. The guaranty fee for loans with a maturity of twelve months or less regardless of loan amount is .25% of the guaranteed portion. The guaranty fees for loans with a maturity of greater than one year are:
- Loans of $150,000 or less – 2% of the guaranteed portion
- Loans of $150,001 to $700,000 – 3% of the guaranteed portion
- Loans of $700,001 to $1,000,000 – 3.5% of the guaranteed portion
- Loans of $1,000,001 to $5,000,000 – 3.5% of the guaranteed portion
of the first $1,000,000, then 3.75% of the guaranteed portion of the
Additional fees may apply. Fees may be able to be paid from loan proceeds.
The interest rate is negotiated with the bank, but may not exceed 2.25% over the prime lending rate for loans with maturities of seven years or less, and 2.75% over the prime lending rate for loans with maturities greater than seven years.
Collateral will include all business assets and may also include personal assets. Personal guarantees are required from any person owning 20% or more of the business and from any individual pledging personal assets.
*Owner must occupy 51% or more of the building’s total square footage.