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SBA 7(a) Loan Programs

If you’re looking for a Small Business Administration loan to buy or refinance commercial real estate the popular SBA 7(a) loan could be for you. In conjunction with a commercial real estate loan request, using funds for working capital, machinery and equipment and furniture and fixtures may be considered by LCC. You’ll need a 1st Deed of Trust/Mortgage on commercial real estate and to meet SBA qualifications such as having a maximum Loan to Value of 90% depending on your property type.

 

Key features of this program include:

  • A typical project structure of 75 – 90% LTV and 10 – 25% equity injection
  • A maximum loan amount of $2,000,000
  • Maturity and Amortization up to 25 years for real estate, 10 years for business acquisition, between 7 to 10 years for debt refinancing and up to 7 years for permanent working capital (blended maturity and amortization will be applied depending on final structure as determined by SBA guidelines)
  • Maximum LTV Multi-Use of up to 90%
  • Limited or special purpose real estate up to 80% LTV

 

Some examples of eligible use of proceeds are:

  • To purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities
  • To acquire equipment, machinery, furniture, fixtures, supplies or materials
  • For long-term working capital, including the payment of accounts payable and/or for the purchase of inventory
  • To refinance existing business indebtedness which isn’t already structured with reasonable terms and conditions
  • For short-term working capital needs, including seasonal financing, contract performance, construction financing, export production and for financing against existing inventory and receivable under special conditions
  • To purchase an existing business.

 

Some examples of where you wouldn’t be eligible to use proceeds include:

  • To effect a partial change of business ownership or a change which would not benefit the business
  • To permit the reimbursement of funds to any owner, including any equity injection or injection of capital for the business’ continuance until the loan supported by the SBA is disbursed
  • To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow.

 

The property in question must be occupied by a minimum of 51% by the Small Business Concern (60% for new construction) and of these types:

  • Office: Professional, Condominium, Medical, Dental and Veterinarian.
  • Industrial: Heavy and Light Manufacturing, Warehouse and R&D Flex.
  • Retail: General.
  • Special Use: Assisted Living Facilities, Adult Care, Day Care Facilities, Restaurants, Funeral Homes, Hotels/Motels.

 

Interest rates are generally adjustable based loans, tied to the Prime Index rate. Maturities up to 25 years are available based on use of loan proceeds. Fees are based on the total loan request and calculated on the guaranteed portion of the loan. The SBA fees are not currently being charged as part of the American Reinvestment and Recovery Act.

 

To qualify, here are the underwriting requirements:

  • You must have prior ownership and management experience
  • Minimum FICO of 680
  • All loans are Full Recourse and require the personal guarantee of any and all individuals or entities holding 20% of the ownership interest or more
  • A 1.25 x Minimum Debt Coverage Ratio (DCR) for the most recent FYE and Interim period is required.
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