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SBA 7(a) Loan Program

SBA 7(a) loans are the most commonly used type of SBA loan given the various financing options available. In addition, this is the most flexible of all the SBA loan programs, since funds may be used for a variety of general business purposes.

Authorized Area of Operations

In an effort to expand the value of membership in Business Development Corporation (BDC), we have authority from both the state and the Small Business Administration (SBA) to make SBA 7(a) loans in a seven state area that includes:

  • South Carolina
  • North Carolina
  • Georgia
  • Tennessee
  • Alabama
  • Florida
  • Virginia

Maximum Loan: $5,000,000

Maximum SBA Guaranty: $3,750,000

7(a) Application Package SBA 7(a) Brochure Compare Programs (PDF)

Use of Proceeds

  • Expansion or renovation
  • Construction of new facilities
  • Purchase land or buildings
  • Purchase equipment, fixtures, leasehold improvements
  • Working capital
  • Refinance debt for compelling reasons
  • Inventory expansion

Interest Rates

  • Variable
  • For loans under 7 years, the maximum is Wall Street Journal Prime Rate + 2.25%
  • For loans 7 years or more, the maximum is Wall Street Journal Prime Rate + 2.75%
  • All rates are variable and adjusted quarterly as the Wall Street Journal Prime Rate Changes
  • Prime Rate is 4.25%

Eligibility

  • Business operated for profit (no non-profit entities)
  • Meets SBA size standard which is based on sales volume or number of employees and varies by industry
    ( i.e. Manufacturers up to 500 employees, Retail $7 million or less in average annual sales over the last three years)
  • Owner/Operator shows good character
  • Management expertise and commitment
  • Demonstrates ability to repay
  • Business may not be involved in speculation or investment

Term

  • Generally working capital is 5-7 years
  • Machinery and equipment not to exceed useful life
  • 20 year maximum on real estate and construction

Guaranty and Other Fees

  • The SBA Guaranty Fee is based on the amount guaranteed
  • For loans up to $150M, the guaranty fee is 2% of the amount guaranteed
  • For loans larger than $150M, the guaranty fee is:
    • 3% of the guaranteed amount up to and including loans for $700,000
    • 3.5% of the guaranteed amount for loans greater than $700,000
    • When the guaranteed portion of a loan is over $1 million, an additional 0.25% is added to the guaranteed portion that is in excess of $1 million
  • The borrower pays the guaranty fee, closing costs and other direct costs (such as environmental reports and appraisals)
  • Certain costs and fees can be financed
  • BDC requires a nonrefundable Packaging Fee ranging from $500 to $1,000, which is a tiered amount dependent upon the amount of the loan

BDC Resources

Peter Shand

Peter Shand

President & Treasurer

    803.744.0305
    803.744.0605
    PShand@BDCofSC.org

 

 

Sample Project

John Smith is interested in establishing his own franchised business, which he has determined will cost $250,000 to start.  However, he’s uncertain if he will meet the required conditions of conventional financing.  Due to its start-up nature, his long-term banker, Jane Williams, suggests that John use the SBA 7(a) guaranty program.  Here’s how it works: Business Development Corporation will finance 90% ($225,000) of the total project, leaving John with only a 10% ($25,000) down payment.  Note that these percentages are subject to change.

Lender/Borrower

Project Costs

Percentage of Project Costs

BDC     

$225,000     

90%     

Equity     

$25,000     

10%     

Total Project     

$250,000     

100%     

7(a) Calculator

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