What is a 7a Loan and how can it help my small business?
Starting a business is not just complicated, its expensive. That’s why start-ups and small businesses have the option to finance their venture with small business 7a loans. If you’re in the hotels or restaurant industry, starting a daycare center, or opening up a nursing home and need help on the financial end, this article is for you.
What is an SBA 7a loan?The Small Business Administration (SBA) is a U.S. government agency that provides support to small businesses and entrepreneurs. The 7a Loan Program helps these businesses obtain loans from participating lending institutions.
Who is eligible for a 7a loan?Most businesses are considered eligible for financial assistance from the Small Business Institution. The guidelines state that a business or business-owner must:
- Be a for-profit enterprise.
- Conduct business in the United States.
- Have owner equity to be invested.
- Have a record of good character and sound business practices.
Who is not eligible for 7a loans?Businesses conducting illegal activities, multi-sales distribution, gambling, charitable giving, or investing are not eligible. Additionally, entrepreneurs who are no parole are not eligible either. Here are a few examples of such enterprises:
- Pyramid sales companies: Businesses in which the participant’s incentive is based on sales made by a growing number of participants below him.
- Racetracks and casinos: Any business based primarily in gambling.
- Real estate investment firms: Any business that holds property for investment purposes.
- Churches: Entities promoting religious objectives or any organization based on charitable donations are not eligible.
What can a 7a loan be used for?These loans may be used to open up a new business or to expand or continue the operation of an existing business. They cannot be used to pay delinquent taxes, refinance debt in a way that would be detrimental to the lender, or conduct unsound business practices. Acceptable uses of these loan funds include:
- Purchasing new equipment.
- Covering the cost of construction.
- Refinancing debt in a way that is beneficial to both the borrower and the lender. Other short- or long-term needs.