For "bankable" borrowers, the SBA guarantees a portion of a qualified loan for banking institutions, structured according to stringent guidelines. The question is, are there any banks still doing SBA loans?
Here at BLS, we have the added advantage of being headquartered in "the city where the banks never sleep," so we've been able to build strong partnerships to bring low-rate working capital loans to well-qualified borrowers, many of whom would otherwise have given up on this option. Most American banks participate in the 7(a) loan program as lenders, though none are required to - and the reality is that most banks have internal regulations which lock the majority of applicants out.
In recent years, many non-bank lending partners have began filling the void in the SBA space and the market is showing signs of improvement. We are proud to have acquired the relationships necessary (both banking and non-banking) to participate in this program.
In order to receive a 7(a) loan, a borrower must meet the eligibility requirements set by the SBA. The SBA will not approve a loan if the business has adequate sources of alternative financing, or if the business owners have not already committed personal resources to the business enterprise. In addition to the standard eligibility requirements, the SBA seeks borrowers with a demonstrated ability to repay the loan, good character, a record of sound business practices, and owners with significant equity in their businesses, among other factors.
Loans made through the 7(a) program may be used to start a new business or to acquire, expand, or continue the operation of a current business. Examples of acceptable uses of 7(a) funds are the purchase of new land or equipment, including the cost of construction or refurbishing of existing capital, refinancing existing debt to more favorable terms, or for short and long term working capital needs. Proceeds from the loans may not be used to effect a change of control in the business, engage in speculative behavior, pay delinquent taxes, or to refinance debt such that the lender or the SBA would incur a loss. More generally, loans may not be used for unsound business practices.
On all loans over $150,000, the SBA's exposure is limited to 75% of the loan amount. On loans under $150,000 the exposure may reach 85%. For information on guarantee fees, interest rates and other details, see the 7a loan program infromation posted on the SBA website.