Small Business Administration 7A Guaranty Loan Program
SBA Loan Mission:
The SBA Loan Guaranty Program provides the Bank up to 85% guaranty on Long term loans when the proceeds of the loan are used for fixed asset purchases, working capital, or the refinance of existing debts for owner-occupied business.
Use of SBA Loan Funds:
- Up to 90% financing for the purchase of land and /or building.
- Up to 80% financing for the purchase of machinery and equipment.
- Up to 90% financing for the expansion of an existing facility.
- Can refinance 100% of existing debt under certain conditions.
- Up to 80% financing for the purchase of an existing business.
- Can finance working capital and closing costs in conjunction with the above.
- Operating, for profit Corporations, Limited Liability Corporations, Partnerships. Or Sole Proprietorships.
- Business in existence for minimum of two years.
Target Loan Size:
- Minimum loan of $150,000.
- Maximum loan of $2,000,000.
- Loans above $2,000,000 will be looked at using the SBA's "piggy back" loan program.
- The maximum loan amount under the "piggy Back" program is $3,500,000.
SBA Loan Structure:
- Up to 25 year financing for real estate acquisitions, real estate refinances land purchases or construction loan take-outs.
- Up to 10 year financing for the purchase of an existing business.
- Up to 10 year financing for the purchase of machinery and equipment.
- Up to 7 year financing on working capital, and closing costs.
- Loans will be priced on a variable basis, tied to the New York Prime Rate and will adjust quarterly.
- Minimum pricing will be at New York Prime + 1.50%
- Maximum pricing will be at New York Prime + 2.75%
- Owner must be actively involved in the business operations.
- Business must have adequate debt service coverage based on historical earnings.
- Business must have an adequate debt to worth based on the adjustments to the pro forma balance sheet using the benefits of the new loan.
- Borrower's business must occupy no less than 51% of an existing building and no less than 67% of the "to be built" facility.
- Alter Ego Ownership of the company's real estate is allowed.
- Credit score of 660 or higher.
- Experience in the type of business you are attempting to acquire.
- At least 20% down from money on hand (there are exceptions).
SBA Loan Collateral:
- No unsecured loans are available under this program.
- Goodwill is considered to be an asset when a business is being purchased.
- If the SBA loan is under-collateralized based on the SBA Liquidation values, the guarantor may be required to collateralized his/her primary residence by utilizing a 2nd or 3rd mortgage.
- The SBA does not allow the Bank to charge the borrower points on a 7A guaranteed loan, unless it involves a construction loan. The SBA charges a fee, which is based on the size of the loan guarantee.
- The bank will charge a packaging fee of $1,500 on all loans.