SBA 7(a) Loan Guaranty Program

About SBA 7(a)

The 7(a) Loan Guaranty Program is one of SBA’s primary lending programs. It provides loans to small businesses that are unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders, which provide loans that are, in turn, guaranteed by the Small Business Administration. The SBA has no funds for direct lending or grants.


  • Most types of businesses are eligible as long as they are for-profit and operate in the United States.
  • The firm must meet the SBA’s definition of a “small business,” which varies depending upon the type of business it is. The vast majority of businesses meet this definition.


  • Funds can be used for real estate, machinery & equipment, inventory and working capital.


  • $2 million is the maximum loan available under the 7(a) program, although $1 million is the maximum exposure of the SBA under a guarantee.
  • For loans of $150,000 or less, the SBA guarantees 85% of the loan
  • For loans greater than $150,000, the SBA guarantee is 75%
  • Interest rates may be fixed or variable and are negotiated between the lender and borrower subject to SBA guidelines, loan size and the term of the loan:
Loan Size Term Maximum Interest Rate
$50,000 or more more than 7 years Prime + 2.75%
  less than or equal to 7 years Prime + 2.25%
$25,000 to $50,000 more than 7 years Prime + 3.75%
  less than or equal to 7 years Prime + 3.25%
$25,000 or less more than 7 years Prime + 4.75%
  less than or equal to 7 years Prime + 4.25%
  • Maximum terms are 25 years for real estate & equipment (limited to the economic life of the asset) and 7 years for working capital (although under certain circumstance this can be stretched to 10 years).
  • Guarantee fees apply based upon the size of the loan:
Loan Size Guaranty Amt.
$150,000 or less 1.00%
$150,000 to $700,000 2.50%
More than $170,000 3.50%
  • All loans are subject to a 25 basis point annualized servicing fee on the outstanding balance of the guaranteed portion of the loan.
  • Finally, there are penalties for pre-payment.

Most lenders are familiar with SBA loan programs so interested applicants should contact theirlocal lender for further information and assistance in the SBA loan application process.

Category: State and Federal Financing

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