SBA Express and 7(a) Loan Program

These are the most common loans offered to small businesses. These programs are available through qualified lenders. Most banks and non-bank lenders offer these types of loans, but some are much better than others with SBA loans. Because these programs are offered through a non-bank lender or bank, if the institution does not want to extend this offer to the client (even if the client qualifies for the loan under the basic SBA 7(a) standard) the SBA cannot force the lender to give the loan to the customer. These loans can be either term loans or lines of credit.

Lenders structure the loans based on SBA-guarantee standards. The lender provides the funds to the borrower, while the SBA guarantees a portion of the loan to the bank; both institutions share the risk on the loan. The SBA does not lend money, the bank does. Lenders evaluate whether they can do the loan themselves, or use the SBA guarantee if the application has weaknesses. Most banks like to see that the business has been in operation for at least two years before it will grant a commercial loan. 

Eligibility Criteria

The SBA has very broad requirements, so most businesses can apply for a loan under this program. Remember, however, that the lenders have their own criteria that will be the decisive factor whether a business receives funding.

Personal Guarantee

If you own 20% or more of the business, you must provide a personal guarantee for an SBA loan. If your business does not work, even if you are a corporation, you will be personally liable for the repayment of the loan.

Size Standards

To qualify, the business will have to be independently owned and operated and not dominate its field. You can find the size standards table from the SBA Web site at

http://www.sba.gov/size/sizetable2002.html

Note: If the applicant business is affiliated with other companies, the applicant as well as the affiliated companies will have to comply with SBA size standards.

Type of Businesses

Businesses have to be for-profit, do business in the United States or its territories, and the owners mush invest personal equity into the business.

Businesses with Additional Considerations for SBA Assistance

Franchises are eligible if the franchise agreement does not limit the control of operations, as in an employment contract.

Non-U.S. Citizens may apply for SBA loans depending on residency status. Lenders usually are not able to give loans to non-permanent residents. However, the lender might be able to give a loan if the risk is backed 100% by personal collateralization (securing a loan with your home or personal savings).

In a change of ownership, the funds will be available if the business benefits in the case of further development and expansion of the business or its continuous existence. Limitations apply to:

• When the applicant plans to purchase a business where the borrower has no present interest.
• When the applicant purchases part of the interest of a continuing owner.
• The SBA also discourages loans where the change in ownership is among family members.

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