What Is SBA Lending?

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How does 7(a) Funding Group help your bank's SBA lending model?

You may take it for granted that your company is a “small business.” The distinction is important if you wish to register for government contracting as a small business. To be a small business, you must adhere to industry size standards established by the U.S. Small Business Administration. As you register as a government contractor in the System for Award Management (SAM), you will also self-certify your business as small.

The SBA, for most industries, defines a “small business” either in terms of the average number of employees over the past 12 months, or average annual receipts over the past three years. In addition, SBA defines a U.S. small business as a concern that:

  • Is organized for profit
  • Has a place of business in the US
  • Operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor
  • Is independently owned and operated
  • Is not dominant in its field on a national basis
  • The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences, such as size standards.
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Loan Program

The 7(a) lending model

The SBA 7(a) Loan Program is a guaranteed loan program, where the lending institution makes the loan, but SBA steps in with the payment of their guaranteed portion if the loan defaults. It is used to make term loans for most any type of financing needed by a for-profit operating business. For the fiscal year end 2014 the SBA approved 52,044 loans. The gross loan approvals were $19.2 billion and the guaranteed amount was $14 billion.

  • Purchase of business occupied land and improvements
  • Construction of new facilities
  • Purchase of business including intangible assets
  • Refinancing of existing debt
  • Purchase of equipment
  • Financing of Inventory
  • Working Capital

The maximum loan amount is $5,000,000.

  • $150,000 or less – 85%
  • Over $150,000: – 5%

Total guaranteed amounts not to exceed $3,750,000 to any one borrower and its affiliates See chart in Resources Tab for structure options via SBA (term/maturity, interest rates, etc).