Commercial Real Estate Financing
What Is an SBA 7(a) Loan?
An SBA loan is structured differently than just about any other type of financing. First of all, the SBA doesn’t provide the funding for the loan. They instead serve as a mediator between the borrower and a network of third-party lenders.
The SBA advocates on the borrower’s behalf by guaranteeing a portion of the loan. So if you were to default on the loan, the SBA will pay off that portion. As a result, the guarantee reduces the risk to lenders, providing them with a stronger incentive to approve your application. Consequently, SBA loans often come with favorable interest rates and repayment terms.
If you can afford to wait for the longer-than-average processing time of an SBA loan, it can be an amazing option for your small business.
Using an SBA 7(a) Loan
Some small business loans are engineered for specific purposes. For example, equipment financing is for equipment-related needs and commercial mortgage financing helps you with property related expenses.
An SBA 7(a) loan, however, can be used for a wide range of business expenses. Possible uses include:
- Refinancing existing debt
- Fixing existing equipment
- Purchasing new equipment
- Hiring additional employees
- Adding inventory
- Making upgrades to technology
If you ever have questions regarding uses, it’s advisable to check with your lender.