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The advantages of the SBA 7(a) loan program

On Behalf of | May 6, 2015 | HOA

Kansas businesses that are looking to purchase or refinance commercial real estate may want to obtain some information about a type of small business loan that they may qualify for. These loans, backed by the government, are often easier to qualify for and have more generous terms for small businesses.

A business that is interested in purchasing, refinancing or renovating commercial property may be able to benefit from a U.S. Small Business Administration loan program. In particular, the agency’s 7(a) program allows small businesses to borrow money on many favorable terms. For instance, a 7(a) loan allows a higher ratio of loan amount to property value, along with longer amortization terms. Additionally, the lender can look at projected business income rather than strictly past performance when determining borrower qualification. The loans have a maximum funding amount of $5 million and can be for a term of up to 25 years.

These loans are not actually funded by the SBA, but rather they meet a certain set of standards that the SBA sets forth. The lender is guaranteed a certain portion of the loan by the SBA, however, reducing the overall risk. In addition to their use for commercial real estate, 7(a) loans may also be used in restructuring a company’s debt, purchasing certain assets and in acquiring new businesses. The requirements and standards for these loans, however, are subject to change depending on the government’s current policies.

Because of this potential for change, an attorney may explain the latest rules to a business owner. The attorney may also be of assistance in analyzing the client’s options for obtaining a loan for commercial development and other business uses.