What is a SBA 7(a) Loan?
Small Business Administration SBA 7(a) loan program provides the SBA 7(a) loans to small businesses. These loans are of up to $5 million. Being the most popular loan program, the capital or profit it lends, can be used for other business purposes that can help a lot of small businesses. Commercial real estate is an example of the purpose it can be used for. These loans can be bought up to 25 years with specific interest rates.
How Does SBA 7(a) Loan Work?
The aim is to provide breakthroughs to those people coming from or those who own small businesses so they can start up the right way. If you’re a small business in search of small loans, then the SBA 7a loan should definitely be in your list. You want the least expensive option for your business as it’s in the introductory stage currently. Factors like payment schedules, funding speed, time period, loan size and the legwork also affect the amount of money that you need to pay for your loan. What the SBA does is it partially guarantees the loans that other lenders and banks make to the certain business. 85% to 50% is the range of the partial guarantee but it also depends on the size of the loans and if the borrower can afford it. This guarantee makes loaning to startups seem safe and less risky. In the end, if the borrower or the business fails to fulfill payment of the loan, then the SBA guarantee makes sure that 50 to 85% of the loan will go the bank directly.