The SBA 7a loan program can provide small businesses with long-term financing for real estate acquisition, building construction, renovation, expansion, purchase of machinery and equipment, purchase of inventory and working capital. Repayment of debt is also permitted where existing short-term credit is not meeting the financial needs of the business.
SBA's new LowDoc, or low documentation, loan program streamlines the loan application process for guaranteed loans of $100,000 or less. Under LowDoc, SBA can guarantee up to 80 percent of a loan made by a commercial lender to an existing business, a business purchase or a business start-up. Combining a greatly simplified application process with a rapid response from SBA loan officers -- usually only two or three days -- LowDoc slashes pages of bureaucracy and red tape out ot the loan process. The application form consists of a single page. Any small business eligible under the regular 7a loan program can apply under LowDoc if its average annual sales for the previous three years is $5 million or less and it employs 100 or fewer individuals, including affiliates.
Advantages
•Long-term financing available to those unable to obtain conventional sources.
•Availability of SBA's new LowDoc streamlined loan program.
Use of Funds
•Land. •Machinery.
•Building construction. •Inventory.
•Renovation. •Working capital.
Source of Funds
•Bank guaranty.
Interest Rates
•Bank guaranty loan:
-Lender sets rate, may be fixed or variable, up to 2.75% above New York prime if seven-year term or more; 2.25% above New York prime if under seven years.
Maturity Term
•Purchase of machinery and equipment, furniture and fixtures: up to 10 years based on useful life.
•Purchase of land, buildings and/or construction: up to 25 years.
•Working capital: five to seven years.
•Purchase of inventory or supplies: five to seven years.
•Combination loans: five to 25 years.
Limits
•Bank guaranty loan:
80% guaranty on bank loans through $100,000.
75% guarantee, up to a maximum of $750,000, on loans over $100,000.
Guaranty fee of 3%-3.875% can be charged to borrower depending upon amount of loan.
Guaranty fee will be 2% if total guaranteed portion of the loan is $80,000 or less.
Eligible Businesses (This list is not comprehensive.)
•Must be small business per SBA size standards.
•Manufacturing companies: maximum number of employees 500 to 1,500 depending on product manufactured.
•Wholesale companies: maximum number of employees may not exceed 100.
•Services: annual receipts may not exceed $3.5 million to $21.5 million, depending on industry.
•Retailing: annual receipts may not exceed $5 million to $21 million, depending on the industry.
Ineligible Uses (This list is not inclusive.)
•Speculation in any kind of real or personal property.
•Non-profit businesses.
•Businesses engaged in lending or investment.
Source: Alabama Development Office