Securing reliable funding is one of the most important steps a small business owner can take to fuel growth, manage operations, or navigate changing market conditions. For many entrepreneurs, SBA (Small Business Administration) loans remain one of the most trusted and cost-effective ways to access working capital.
These government-backed loans offer favorable terms, competitive interest rates, and flexible use of proceeds, making them a smart solution for long-term success. If you’re exploring funding options, here’s what you need to know about SBA 7(a) loans and how to determine if they’re right for your business.
Apply for an SBA Loan
Today, SBA loans, especially the 7(a) loan program, remain a leading financing option for qualified small businesses. With competitive interest rates, longer repayment terms, and flexible use of proceeds, these loans may offer a financial foundation for sustained growth. If you're looking to fund new opportunities or refinance high-cost debt, an SBA loan may be the right move.
What is an SBA 7(a) loan?
SBA loans are business loans guaranteed by the SBA. This government agency provides loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender, typically banks.
The 7(a) loan programs let you borrow money for business purposes, including working capital, for inventory or equipment, to refinance other debts, or to purchase commercial real estate.
SBA loans have low interest rates and long repayment terms, making them one of the most sought after types of business financing available. These loans may require a longer application than others and may be slower to fund.
Who SBA 7(a) loans are for
SBA loans are good for established small business owners wanting to shore up finances or expand with new inventory, additional products, or another location. Typically, businesses approved for an SBA loan from SmartBiz Bank have $250,000 to $5 million in annual revenues and 1 to 40 employees, are profitable and have a positive cash flow. All can provide proof that they are able to make the monthly loan payment.
How it works
Here’s the application process for SBA 7(a) loans from SmartBiz Bank:
- We get to know you and your unique business
- Complete one online loan application through our advanced technology platform
- No faxing or printing required
- Discover if you’re pre-qualified in about 5 minutes with no impact on your credit score1
- We help you understand your options
- Once you pre-qualify, you are assigned to a team of dedicated professionals who can answer any questions and walk you through the online loan application process.
SBA 7(a) loan amounts available
Businesses may be able to get an SBA 7(a) loan for any amount of up to $5 million. The SBA has no minimum amount for any of its loan programs and SBA has guaranteed loans for small businesses for $10,000, or less.
The first important decision you will make during the loan process is to request a loan amount that will help you reach your objectives. Review your business plan to determine where you currently stand and where you want to go. Speak with your accountant to nail down an amount with the cost of the loan and all fees in mind.
Interest rates for SBA 7(a) loans
Rates may fluctuate depending on economic conditions and borrower qualifications.
A variable rate means your business can borrow money at an interest rate that may go up or down over time. For example, if the base rate rises by 0.5%, the rate on your loan will rise accordingly.
Learn more about current interest rates for SBA loans.
What type of collateral is required for an SBA loan?
Collateral is something pledged as security for repayment of a loan to be forfeited by the borrower in the event of a default. Any business asset that has value, and can be sold by the lender to pay off the loan, may be considered collateral.
Collateral required depends on the SBA use of proceeds. For SmartBiz Bank, a lien on business assets is required. This includes assets such as accounts receivable or inventory, as well as fixed assets such as new equipment purchased with loan proceeds. Commercial real estate and vehicles owned by the business may also be taken as collateral depending on their value. The value of these assets does not need to equal the loan amount you are requesting.
What are the repayment terms for an SBA loan?
The term for an SBA 7(a) working capital loan is 10 years, meaning monthly payments may be very low.
You may partially or fully prepay your loan at any time with absolutely no prepayment penalty or fee.
Examples of use of proceeds
A big draw of SBA 7(a) loans is the wide use of proceeds. Those could include:
- Working capital
- Hiring
- Equipment purchases
- Marketing
- Business expansion
- Inventory and operational expenses
- Debt refinancing
- Commercial real estate
Note that there are ineligible uses of proceeds. An SBA loan must be directly applied toward development, rather than as a temporary solution for financial troubles. According to the SBA, funds cannot be used for:
- Refinancing personal debt
- Payment of delinquent payroll, sales, or real estate taxes
- Payments, distributions, or loans to an associate or owner of the business
- Real estate purchase held primarily for sale, lease, or investment
- Floorplan financing (primarily used by auto dealers)
SBA 7(a) loan requirements
Following are requirements for SBA loans from SmartBiz Bank. Note that a business plan is not required to receive a loan when you work with SmartBiz to facilitate an SBA loan.
- Time in business must be above three years
- Guarantor’s personal credit score must be above 660
- Business must be U.S. based and 51% owned by a U.S. citizen or lawful permanent resident who is at least 21-years old
- No outstanding tax liens
- No bankruptcies or foreclosures in the past 3 years
- No recent charge-offs or settlements
- Up-to-date on government-related loans
Document checklist
SBA lenders want to know if your business is healthy enough to take on a low-cost loan. In other words, can you make every payment on time for the life of the loan? In order to assess business strength, a number of financial documents are required. Because SBA loans are guaranteed by the government, slightly more paperwork may be required. But the low-rates, long terms, and very low monthly payments are worth it. Additionally, you’ll get a clear view of where your business stands if you haven’t crunched the numbers before.
To simplify and expedite the application process, SmartBiz uses intelligent automation to request only those documents relevant to your specific application.
Following are some of the most commonly requested documents:
- Personal & Business Tax Returns
- Profit and Loss Statement
- Balance Sheet
- Collateral Documentation
- Proof of Appropriate Insurance Coverage
- Personal Financial Statements (for any owner with 20%+ ownership)
- Other documents, such as business licenses, Articles of Incorporation, commercial leases, or franchise agreements, may be requested depending on the particular loan application.
A solid strategy is to work with your bookkeeper, accountant or tax preparer to help gather the required documents.
SBA Loans: The Bottom Line
From hiring new team members to financing growth opportunities, there are many reasons to seek affordable small business funding. SBA 7(a) loans continue to be one of the most flexible and cost-effective ways to finance your goals. As the economic outlook evolves, these loans can help you build long-term stability and take advantage of new opportunities.
Want to know if you’re eligible? With SmartBiz, you can see if you pre-qualify for an SBA loan in less than five minutes.1 Get started today and find out what’s possible for your business.
