Some Pinnacle offices are operating with reduced hours due to winter weather. All office and weather updates will be posted to PNFP.com/Weather.
Some Pinnacle offices are operating with reduced hours due to winter weather. All office and weather updates will be posted to PNFP.com/Weather.
Obtaining financing for a newer or rapidly growing business can be a challenge for owners who are starting out because they don’t always qualify for conventional loans. Additionally, sometimes more mature businesses could benefit from extended terms that just aren’t found in the conventional commercial banking market. One option for both types of entrepreneurs is the SBA 7(a) loan program.
What is the SBA 7(a)?
The 7(a) is the U.S. Small Business Administration’s primary program for helping start-up and existing small businesses. It offers flexible, long-term financing for a wide range of needs, including real estate construction, acquisition or refinance, equipment and working capital loans.
Because the loan contains the guaranty of the federal government, financial institutions are allowed to provide more favorable terms. The institution, not the business owner, interacts with the SBA to obtain this guaranty and close the loan with the business.
The 7(a) loan program offers longer terms, lower monthly payments and most importantly, no balloon payments as found in most conventional loans. Other benefits include:
Contrary to what you may have heard, SBA 7(a) loans are not difficult for the experienced lender to obtain, and the underwriting, due diligence and closing procedures closely mirror those used for all conventional commercial loans.
Eligibility
You’re on the right track if you can demonstrate a need for funds and have a sound business purpose in mind. Your business must also meet the SBA’s size standards to be considered “small” for the 7(a) program. However, recent changes in these standards have made many businesses eligible that previously were not. You must operate for profit and have the appropriate personal experience and equity to invest. You’re also required to do business in the United States or its possessions.
How funds can be used
SBA 7(a) loans can be as large as $5,000,000 and used for a wide variety of needs, including:
Your financial advisor can help determine if an SBA 7(a) loan is the right loan for you and walk you through the application process.
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