In this article, you will learn whether the SBA 7a loan program requires a down payment or any out-of-pocket costs by the borrower.

Does the SBA 7a Loan Have a Downpayment?

The short answer is “maybe.” Let’s explain.

If you are considering taking out a loan for your company, one of the questions that automatically comes to mind is whether or not the lender would require you to make a down payment as part of the overall transaction. The response to this question is going to be contingent on a number of things, such as the reason you need the loan and your past credit history. The good news is that borrowers who take out SBA 7a loans are frequently able to negotiate for smaller down payments than they would be required to make with a normal company loan.

The Fundamentals of SBA 7a Loans

It is the goal of the United States Small Business Administration (SBA) to provide business owners with a choice when they are unable to secure funding through private channels by way of the SBA 7a loan program. When compared to requirements for normal business loans, those for SBA 7a loans are typically more lax.

Under the SBA 7a loan program, the SBA does not directly lend money to business owners. Instead, it assists owners of businesses in the preparation of loan applications for lenders at the beginning of the loan application process. The Small Business Administration (SBA) provides loan guarantees up to predetermined maximums, which makes it easier for entrepreneurs to obtain financing for the establishment of new businesses, the expansion of existing businesses, the purchase of equipment, as well as the acquisition of working capital and inventory.

SBA 7a Loan Guarantees

The following is a list of the types of business loans that the SBA guarantees:

For most 7(a) loan programs, the SBA can guarantee up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. However, SBA Express loans carry a maximum of 50 percent guaranty and Export Express loans carry a maximum 90 percent guaranty. The Export Working Capital loan program and International Trade loans carry a maximum of 90 percent guaranty, up to a guaranteed amount of $4.5 million.

As a result of this additional layer of protection in the event of default, the regulations surrounding SBA 7a down payments and other SBA loan terms are more lenient than those for other types of business loans.

Minimum Amounts Required for a Down Payment on an SBA 7a Loan

One of the benefits of obtaining this kind of business finance is that the need for the down payment is not very high. It is feasible to secure financing for a commercial enterprise with as little as a five percent initial deposit. Borrowers typically make a down payment of 10% of the total loan amount when applying for an SBA 7a loan.

In conclusion,the SBA 7a loan does not have a downpayment requirement. This makes the loan an attractive financing option for small businesses. However, borrowers should be aware that the loan does have some other requirements, such as collateral and a personal guarantee.

If you have questions or want to get the loan process started, contact our experienced commercial loan advisors today.