833-FL-BRAVO
786-429-3521
SBA 7A Commercial Real Estate Loans
The SBA 7A loan program is the Small Business Administration’s flagship solution for helping small businesses access affordable financing. As the most widely used SBA-backed loan, the 7A program supports thousands of businesses each year, including those in real estate. While eligibility requirements must be met, many small business owners find this loan to be a practical path to funding with the benefit of government-backed support to enhance their borrowing potential.
Contact us to know more
SBA 7A Commercial Property Loan Highlights
| Eligible Properties: | Office, Warehouse/Industrial, Mixed Use, Retail, Medical/Healthcare, Self Storage, Hotel/Motel |
|---|---|
| Loan amount range: | Minimum $5,000,000 |
| Interest Rate: | Prime + 2.75%. See LIBROR rates. |
| Loan Term: | Up to 25 years for commercial properties |
| Amortization: | 25-30 year amortization with up to 10 years of interest-only available in select instances. |
| Maximum LTV: | 75% For Loans Over $150,000 |
| Minimum DSCR: | 1.25x |
| Minimum Debt Yield: | 7-8% |
| Recourse: | Typically Full-recourse. |
| Prepayment: | For loans with maturities of 15 years or more if prepaid during the first 3 years. (5% year 1, 3% year 2 and 1% year 3) |
| Guaranty Fees: | Above $700,000=3.5% up to the 1st million: plus .25% on guaranty portion over $1 million. |
| Reserves: | SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount on loans over $350,000. Personal guarantees are required for owners that have a 20% or more stake in the business |
Advantages / Disadvantages of SBA 7A Loans
Advantages:
The SBA 7A loan program offers a range of features that make it an appealing financing option for qualified small businesses:
-
Increased Accessibility:
Backed by the SBA, these loans may be available even when other financing options are out of reach, giving lenders more confidence to approve applications.
-
Competitive Interest Rates:
With maximum rates regulated by the SBA, borrowers benefit from fair, transparent, and competitive terms.
-
Flexible Loan Amounts:
Businesses can access funding that suits their needs, from under $150,000 up to $5 million. The available options consist of both term loans and lines of credit, offering flexibility in the utilization of funds.
Disadvantages:
While the SBA 7A program offers benefits, it may not be ideal in every scenario. Consider the following limitations:
-
Strict Eligibility Requirements:
Applicants must meet SBA guidelines, which typically include a credit check and other qualification criteria. Not all businesses will qualify.
-
Prepayment Penalties:
If you plan to repay or refinance early, be aware that some of the loans may carry a penalty for doing so.
-
Personal Guarantee Requirement:
Even with SBA backing, business owners must personally guarantee repayment, which adds a layer of personal monetary responsibility.
-
Lengthy Approval Process for Transfers:
Although 7A loans are assumable, the SBA’s detailed approval process can slow down ownership transfers.
-
Variable Rates:
Many 7A loans come with quarterly adjustable rates, which may impact long-term budgeting depending on market conditions.
SBA 7A FAQ’s
SBA 7A loans are financing solutions backed by the U.S. Small Business Administration. Rather than issuing loans directly, the SBA guarantees loans made by approved lenders, helping small businesses access funding for which they might not otherwise qualify.
The program is named after Section 7A of the Small Business Act of 1953 and includes several variations. While not all are suitable for real estate businesses, key options like the Standard 7A Loan, 7A Small Loan, SBA Express, Veterans Advantage, and CAPLines may apply. (Note: SBA Express differs from SBA Export Express, which supports export businesses specifically.)
SBA 7A loans support a range of uses including working capital, equipment purchases, business acquisitions, and commercial real estate construction or renovation. They are ideal for properties where the owner occupies at least 51% of the space—such as offices, retail centers, hotels, or mixed-use developments.
These loans can also help finance distressed properties, offering opportunities where conventional financing might fall short. One significant benefit of the 7A program compared to the SBA 504 loan is its capacity to combine the acquisition of a business with the related commercial property and working capital requirements, which is not allowed under the 504 program.
The Standard 7A Loan allows up to $5 million in funding with maturities of up to 25 years. Interest rates are capped by the SBA, but lenders and borrowers may negotiate lower terms. The SBA guarantees up to 85% of loans up to $150,000 and 75% for larger loans.
SBA Express Loans provide up to $350,000 with up to a 7-year term, guaranteed at 50% by the SBA. These loans offer faster decisions, typically within 36 hours.
CAPLines offer revolving credit options. Contract and Builders CAPLines, often used by contractors, provide terms of up to 10 years and 5 years, respectively.
Veterans Advantage is not a separate loan but a fee-reduction benefit that can apply to any SBA loan program for eligible veteran-owned businesses.
- SBA Guarantee: All 7A loans come with a federal guarantee that provides lenders greater confidence in extending credit. Borrowers must apply through SBA-approved lenders.
- Interest Rate Caps: The SBA sets maximum rates, ensuring access to fair and affordable financing options.
- Prepayment Penalties: These loans include prepayment penalties. Terms and structures vary by loan type, so it is important to understand these upfront.
- Loan Assumption: Loans may be assumable if the acquiring business meets SBA eligibility standards, subject to an SBA approval process.
- Personal Guarantee Requirement: Any individual owning 20% or more of the business must personally guarantee the loan even though a portion is federally backed.
Get In Touch With Us
We understand that every dream is unique and personal. If you're ready to take the next step or simply have questions.
