Is an SBA 7(a) Loan the Right Business Financing Option for Right Now?

posted Ryan Collins 6/17/2020 in Business

SBA 7(a) Loan

The Small Business Administration has become an even more critical financial resource.

With the National Federation of Independent Businesses (NFIB) reporting that 92% of small businesses have been negatively impacted by coronavirus pandemic, the Small Business Administration has become an even more critical financial resource.

The SBA’s business stimulus programs have captured a great deal of attention recently, but its flagship 7(a) loan program has been around since 1953. Despite this, many business owners aren’t familiar with its benefits and may have never considered a 7(a) loan.

But, today’s business climate is like nothing we’ve seen in the past. Now may the right time to give the 7(a) program a fresh look. Here’s an overview of what it can offer.

  • Receive up to $5 million in capital. If needed, a business can access high amounts of capital with an SBA 7(a) loan. This can be particularly helpful for companies that need to invest in expensive equipment, materials, or technology. For businesses that need a smaller loan under $350,000, the SBA offers an Express Loan option with a streamlined process and faster turnaround time.
  • Obtain a loan with little or no physical collateral. Most conventional commercial loans are fully secured with physical collateral, which mitigates risk for the lender. An SBA loan offsets the lender’s risk when collateral is missing because it is backed by the U.S. government.
  • Longer terms for lower monthly payments. A key benefit of 7(a) loans is the option to extend the terms beyond what conventional business loans offer. This can mean up to 10 years for equipment loans, and 25 years for real estate loans. Businesses that take advantage of the maximum terms can lower monthly payments and significantly improve cash flow – a particularly attractive benefit while the economy is uncertain.
  • Competitive interest rates. The growth of financial technology in recent years has created a new arena of nonbank lenders that companies can turn to for fast capital – but, this often comes at a cost. An SBA 7(a) loan almost always offers better interest rates for long-term financing, saving companies thousands of dollars over the long run.
  • Six months of payment relief. For new 7(a) loans disbursed prior to Sept. 27, 2020, the SBA is offering six months of payment relief as part of its coronavirus business aid. This means the SBA will make six months of payments, interest, and associated fees, beginning with your first loan payment. This is not a payment deferral, and you won’t be required to apply for loan forgiveness. You are automatically eligible when your loan is approved by the SBA.

Explore the benefits of an SBA 7(a) Loan today! Contact one of our knowledgeable local commercial lenders!

Contact a SBA Lender

Lincoln Savings Bank. Member FDIC.

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