What it is used for
- Buying an existing business, including partner buyouts
- Buying, building or refinancing owner-occupied commercial real estate
- Purchasing major equipment
- Working capital and inventory
- Refinancing qualifying business debt
How it is typically structured
- SBA 7(a)
- Loans up to $5 million for acquisitions, real estate, equipment, working capital and refinancing
- SBA 504
- Owner-occupied real estate and major equipment, commonly structured as about 50% bank loan, 40% CDC loan and 10% borrower equity
- Terms
- Commonly up to 10 years for working capital and equipment and up to 25 years for real estate
- Occupancy
- Real estate must be owner-occupied, generally at least 51% for existing buildings and 60% for new construction
- Guarantees
- Owners of 20% or more of the business generally provide personal guarantees
Terms vary by lender, property and borrower. This is general market information, not a quote or commitment.
What lenders look at
- Business cash flow and ability to repay
- Owner credit and management experience
- Equity injection
- Collateral available
- SBA size standards and eligibility for the industry
What you will need
- Three years of business and personal tax returns
- Year-to-date profit and loss statement and balance sheet
- Business debt schedule
- Personal financial statement for each owner of 20% or more
- Purchase agreement or letter of intent, for acquisitions and real estate
Your portal checklist is generated from your deal, so you are only asked for what your file needs.
How DealRail places it
SBA lenders differ widely in the industries, loan sizes and deal types they prefer. We package the file to SBA standards up front and route it to the lenders actively closing that kind of loan, which saves weeks of trial and error.
Common questions
What is the difference between an SBA 7(a) and an SBA 504 loan?
The 7(a) is the general-purpose SBA loan and can fund acquisitions, working capital, equipment, refinancing and real estate. The 504 is designed for owner-occupied real estate and major equipment, and pairs a bank loan with a long-term, fixed-rate loan from a Certified Development Company.
Can I use an SBA loan to buy an investment property?
No. SBA real estate loans require the business to occupy the property. For investment property, DSCR, bridge and conventional commercial real estate loans are the usual options.
How much down payment does an SBA loan require?
It depends on the program and the deal. Many SBA loans require around 10% equity from the borrower, with more required for startups, special-purpose properties and some acquisitions.