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A Guide to SBA's Standard 7(a) Business Loan Program


The SBA 7(a) loan is the most common of all the SBA’s loan programs. A business can borrow up to $5 million from their bank (an approved SBA lender), and the SBA will guarantee 75% of the amount greater than $150k.

This loan is popular because it offers flexibility and accepts a wide range of business purposes, including but not limited to:

  • Purchase or refinance commercial real estate
  • Acquire businesses or buy-out a partner
  • Purchase equipment
  • Make tenant improvements
  • Add working capital

Keep in mind that you’re not borrowing from the SBA itself. The funds are coming from your bank, but the SBA will guarantee a certain amount of the loan. Next, we will explain some important requirements and features of the SBA 7(a) business loan.


Many businesses and start-ups qualify for an SBA 7(a) loan program. The key factors are based on what your business does to make money, the character of the business ownership, and where the business is located (i.e. your business needs to be based in the US).

Although the SBA will look at each business on a case-by-case basis, and given that you still need to meet your bank’s requirements for the SBA-guaranteed loan, there are some common elements for all applicants, including but not limited to:

  • The business must operate for profit
  • Be defined as “small” by the SBA
  • Have a reasonable equity invested
  • Using alternatives to borrowing, such as personal assets
  • Demonstrating a legitimate need for the funds (i.e. it has to be for what the SBA deems a sound business purpose)

Common Reasons for the Loan

The SBA is going to look for some basic reasons they deem legitimate for the loan. It’s important that you can demonstrate what they are. Debt refinance and working capital are among the most common, as well as purchasing:

  • Machinery
  • Equipment
  • Real estate
  • Buildings or another business

Because the SBA has specific purposes in mind, they also have some that mean you won’t qualify for the loan. For example, you won’t qualify if you’re planning to use the funds to repay delinquent state or federal taxes–or any other kind of delinquent government debt for that matter.

Ineligible Businesses

There are certain kinds of businesses that the SBA views as ineligible for their 7(a) loan program. For instance, if you’re in the business of lending money yourself–like a pawn shop–then you won’t qualify for a SBA loan.

The Credit Check

Be prepared by knowing what your credit score is and what, if anything, is on your report that may affect your ability to get a loan. On your credit report, look for:

  • Blemishes on your personal and business reports, and then do what you can to fix them.
  • Any inaccuracies, so you can get them cleared up.

The Application Process

Although the SBA is working on streamlining their application process, it’s still common that there may be many obstacles you’ll have to get through. As an approved SBA lender, the bank understands the process and will help make it as smooth as possible.

There’s a fair amount of documentation you’ll need to provide. Make sure you review this and gather and fill out all the required paperwork (you may consider filling out some of the financial paperwork with the bank to make this process easier). Then double-check the checklist with the bank to make sure you haven’t missed anything.

Repayment Terms

The SBA 7(a) loan offers longer-term small business financing. The SBA will work with your bank to determine when the loan will mature. In other words, they’ll look at your ability to repay the loan and what you’re using the funds for.

Depending on what the loan is for, there are maximum maturities:

  • Real estate – 25 years
  • Equipment – 10 years
  • Working capital – 7 years

Like most bank loans, you will make repayments on the principal and interest on a monthly basis.


The expectation is that every 7(a) loan is fully secured. Other collateral might be required as needed and will be ultimately determined by the bank’s loan policy.

Start the Loan Process with Pacific Premier

The good news? Many small businesses qualify for the SBA 7(a) loan because the spectrum of eligible businesses is so wide. This is also why it’s the most commonly used loan program. It’s important to note that it functions similarly to a traditional loan.

If you’re looking for a loan to help you finance your business acquisition or expansion, or you’re looking to increase your working capital, purchase real estate or equipment, then the 7(a) loan may be your best bet. Contact us at Pacific Premier and we’ll help you start the process.

The information expressed is being provided for informational and educational purposes only. It is not intended to provide specific advice or recommendations for any individual or business. Pacific Premier Bank does not provide tax, legal or accounting advice and the information contained herein should not be construed as such. You should carefully consider your needs and objectives before making any decisions. For specific guidance on how this information should be applied to your situation or business, you should consult your own tax, legal and accounting advisors before applying any recommendation. All loans subject to credit approval.

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