SBA 7(a) Loans

One of the most popular lending programs offered by the US Small Business Administration is known as the SBA 7(a) loan program. Although it might seem otherwise, the U.S. Small Business Administration (SBA) does not issue SBA loans. Rather, the agency provides a government backing to banks and other lenders in which it agrees to pay a portion of the loan to the lender should a borrower default. By mitigating lender risk, the SBA makes it more palatable for lenders to provide money to growing companies.

Essentially, an SBA loan is a traditional commercial term loan from an approved SBA lender that has been given a government guarantee to back the deal. By alleviating some of the risk that comes with lending money to entrepreneurs who may not qualify for traditional loans, the SBA opens up funding opportunities to start-ups and growing businesses, including women-owned, minority-owned, and veteran-owned firms.

The SBA can guarantee as much as 85% on loans of up to $150,000, and 75% on loans of more than $150,000. For instance, if an entrepreneur receives an SBA 7(a) loan for $5 million, the maximum amount of a 7(a) loan, the government will cover would be $3,750,000.

While the agency’s lending partners ultimately offer the interest rates and terms of the loans, the SBA sets a maximum interest rate on its guaranteed fixed or variable loans. This rate is tied to the prime lending rate:

  • Prime + 2.25% for loans greater than $50,000 with maturity in less than seven years.
  • Prime + 2.75% for loans greater than $50,000, with maturity in seven years or more.

Lenders have the option of charging an additional 1% on loans under $50,000 and 2% on loans under $25,000.

Additionally, the SBA charges a fee for the portion of the loan guaranteed by the agency (not the face amount of the loan). The fee is passed along to the borrower and is usually built into the loan amount. The fees for loan maturity exceeding 12 months:

  • 2% of the guaranteed portion for loans up to $150,000
  • 3% of the guaranteed portion for loans above $150,000 up to $700,000
  • 3.5% of the guaranteed portion for loans above $700,000

SBA 7(a) loans are popular because of their flexibility. They can be used to fund startup costs, equipment or, inventory purchases and for working capital. Additionally, 7(a) loans can be used not just to start a business but also to acquire or expand an existing one. These loans are particularly helpful for woman-owned, minority-owned and veteran-owned businesses, as well as companies in low income areas.

The eligibility requirements for SBA loans are that a business must:

  • operate for profit,
  • be U.S.-based, and
  • have a reasonable owner equity (time or money) invested in the venture.

Other Forms of SBA Assistance

Beyond facilitating loans, the SBA can help small business owners in a variety of other ways through the following initiatives.

Small Business Development Centers (SBDCs) are hosted by leading universities and state economic development agencies, and funded in part through a partnership with SBA. Each SBDC is staffed by advisors who are there to provide aspiring entrepreneurs and current small business owners with a variety of free business consulting and low-cost services. These include assistance with business plan development, financial packaging and lending guidance, exporting and importing support, and disaster recovery aid.

SBDCs are located across the United States and its territories.


Founded in 1964, SCORE is an association comprised of thousands of volunteer business counselors throughout the country. Usually retired executives, they are trained to serve as advisors and business mentors. SCORE offers free online workshops, small business webinars, and newsletters featuring business tips and interviews with small business experts. SCORE chapters are located throughout the country.

Women’s Business Centers (WBCs) are a national network of over 100 educational centers designed to assist women in starting and growing small businesses. WBCs seek to “level the playing field” for female entrepreneurs, who still face obstacles in the business world. SBA’s Office of Women’s Business Ownership (OWBO) oversees the WBC network, which provides entrepreneurs (especially women who are economically or socially disadvantaged) comprehensive training and counseling on a variety of topics in several languages.

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