How to Apply for a 7(a) Business Loan

Want to apply for a 7(a) business loan? This article explains how you can use the 7(a) business loan and how to apply.
Dooley Noted, Business Lawyer, Estate planning, Restaurant Lawyer, Insurance Dispute attorney, Alternative Dispute Resolutions

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Staff Writer, @DooleyNotedLaw

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The Small Business Administration (SBA) is a government-funded program that provides many options for funding for small businesses. Funding options include loans, investment capital, disaster assistance, bonds, and grants. This article discusses what is a 7(a) business loan, and how to apply for a 7(a) business loan. Moreover, we will talk about how you can use the 7(a) loan for your small business and how a Texas Business Lawyer can help you.

What is a 7(a) Business Loan? 

As a small business owner, you can start or grow your business with the 7(a) business loan. It’s important to know what is a 7(a) business loan.

The 7(a) loan program makes up the SBA’s most common loan program. This loan provides the best option when real estate is part of the business purchase. However, small businesses can also use this loan for various needs.

This loan program offers lower interest rates and longer terms compared to other loan programs, making it a popular loan option. Connect with a Texas Business Lawyer to see if this loan is a good fit for your business.

Below, you will discover the eligibility requirements, how to use the 7(a) business loan, and how to apply for and receive funding.

Eligibility Requirements

Although the 7(a) business loan is the SBA’s most popular loan, this loan is not available for everyone.

First, the 7(a) loan requirements request that your business operates for profit. In other words, the 7(a) business loan is not available for nonprofit organizations. Also, the SBA limits these loans to small businesses defined by the SBA. While this definition varies by industry, the SBA typically determines small business status based on the number of employees and the annual revenue. Most importantly, the business must operate in the United States.

Additionally, the SBA often requires the following from a small business to be eligible for a 7(a) business loan. 

  • Have reasonable invested equity 
  • Use alternative financial resources, including personal assets, before seeking financial assistance 
  • Be able to demonstrate a need for a loan 
  • Use the funds for a sound business purpose 
  • Not be delinquent on any existing debt obligations to the U.S. government 

Read more about terms, conditions, and eligibility for the 7(a) loan program here.

How To Use the SBA 7(a) Loan?

The SBA 7(a) business loan is a standard loan option due to its diverse use. While the SBA recommends this option for real estate purchases, small businesses can use this loan in several ways. Real Estate purchases include the purchase of property or buildings, the construction of a new building, or the renovation of an existing building.

Moreover, other uses of the 7(a) loan include working capital such as equipment purchases, inventory, or other goods and supplies.

The SBA also allows small businesses to utilize the 7(a) loan for refinancing existing business debt under certain conditions. 

How To Apply for a 7(a) Business Loan

You’ll need to gather the required paperwork and documentation when ready to apply for a 7(a) business loan. We recommend following the steps below to ensure a smooth application process.

Contact a Business Attorney in Texas

First, connect with a Texas Business Lawyer. Not only can they better explain what is a 7(a) business loan, a lawyer can assist you in navigating the application process. Dooley Noted Law works with small business owners and entrepreneurs to help them through various application processes––such as when you apply for a 7(a) business loan. 

A small business attorney can ensure you collect all documentation, accurately complete the application paperwork, and assist you in applying. Additionally, an attorney can help you understand your loan terms and help you finalize the closing process. 

Collect Your Documentation

First, the SBA requires several documents to complete your loan package. The following includes a list of SBA forms to complete. You can find these forms directly on the 7(a) loan information page.

  • Form 1919: Borrower Information Form
  • Form 912: Statement of Personal History
  • Form 413: Personal Financial Statement
  • Form 148 or 148L: Unlimited/Limited Personal Guarantee

Second, the SBA requires business documentation aside from the forms listed above. Business financial statements, bank statements, and tax returns include typical documentation for securing a loan. Additionally, the SBA often requires proof of good business standing with documents such as a business certificate, licenses, or specific permits. 

Lastly, the SBA may require specific information from owners or key business personnel. This documentation may include personal resumes, personal tax returns, and other ownership and affiliations information.

It’s worth noting that the SBA may require a business to submit additional documentation and forms based on the use of funds, the status of the company, or if you plan to purchase an existing business.

Complete and Submit Your Application

After you’ve prepared all your paperwork, you can submit your 7(a) loan application to your lender. 

If your lender is an SBA-preferred lender, it can make a final credit decision without sending the application to the SBA. Essentially, this means your business should receive a much faster approval. However, non-preferred lenders will require SBA approval first, and this route may delay the timeline.

Generally speaking, businesses can expect a 2-3 month turnaround from beginning the application process to closing. 

Review your Loan & Complete the Closing Process

You’ll need to ensure you read and understand your loan agreement, including rates, terms, repayment schedule, and all other details of your loan. At this time, a Texas Business Attorney certainly comes in handy. An attorney can act as your advocate, reviewing the terms on your behalf and helping you fully understand the scope of your loan. 

Why Hire a Texas Business Lawyer to Apply for 7(a) Business Loan

As a small business owner, you have many loan options. Exploring the benefits and process of how to apply for a 7(a) business loan can be complex, so it’s best to have an expert on your side to guide you through the process.  

From navigating loan options to the application process to understanding and finalizing the terms of your loan, a Texas Business Lawyer can serve as your advocate as you navigate the process.

Dooley Noted offers free consultations to get you started. We can help you make an informed decision as you navigate SBA funding and see if the 7(a) business loan is a good fit for your small business.

The contents of this post, and the posting and viewing of the information on this post, should not be construed as, and should not be relied upon for, legal advice in any particular circumstance or fact situation. An attorney should be contacted for advice on specific legal issues.

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