7(a) SBA Loan Basics

Presented here are some of SBA Loan basics for the 7(a) type of loan. The 7(a) SBA Loan Program is a lending program that is the SBA’s main avenue for funding small businesses. Loan amounts, terms, conditions, and guarantees vary depending on the loan. Below are some of the basics to know when considering buying or expanding a pharmacy with a 7(a) SBA Loan.

 

There are eight basic types of loans from the SBA 7(a) program:

1. Standard – up to $5M. Collateralized loans for eligible businesses.

2. Small Loan – up to $350,000. Collateralized loans. With possible loan process of 10 days.

3. SBA Express – up to $350,000. With 36-hour response from SBA. When a streamlined method to funds is necessary for domestic businesses.

4. Export Working Capital – up to $5M. For businesses with export sales who need additional working capital.

5. Export Express – up to $500,000. With 24-hour response from SBA when a streamlined method to funds is necessary for export businesses.

6. International Trade – up to $5M, use loans for fixed assets for construction, building, real estate equipment, and for working capital for export transactions.

7. Veterans Advantage – loans with reduced fees for Veteran Owned businesses.

8. CAPLines – Seasonal, Contractual, Construction, Working Capital lines that assist small businesses meet short-term, or cyclical needs.

 

Qualifying Information Required from Pharmacy Owner / Buyer

Annual Revenue

Bank Statements                                                                                                                

Business Licenses

Business Plan

Collateral

Credit Score (personal and business)

Experience in the Same Field

Financials (P&L and Balance Sheet)

Franchise Agreements

Personal Character

Property Deeds

Property Lease

Tax Returns (personal and business)

Time in business

Use of Funds

Borrower Information – SBA Form 1919   For providing identifying information regarding the applicant, loan request, indebtedness, principals of the business, and information on current or previous government financing.

Lender’s Application – SBA Form 1920.   For providing information regarding loan eligibility, terms of the loan, use of proceeds, and jobs created/retained by the applicant.

SBA Guaranty

The SBA Loan guaranty is a percentage based on the loan amount and the type of loan.

 

Interest Rate

Interest rates for SBA Loans are driven by the lender. However, maximums rates are controlled by SBA regulations. Interest rates for SBA loans may be fixed or variable and are linked to the prime rate, the LIBOR rate, or an optional rate.

 

Terms

The maximum terms for SBA loans are as follows:

25 years for real estate

10 years for equipment

10 years of working capital or inventory loan

 

SBA Fees

SBA Charges Fees on the guaranteed portion of the loan. Note that these fees are not the Lender’s/Bank’s fees.

Loans up to $150,000 = 2% Fee

$150,000 to $700,000 = 3% Fee

$701,000 to $1,000,000 = 3.5%

$1,000,000 to $5,000,000 = 3.75%

 

Above are just some of the SBA Loan basics for a 7(a) loan. Of course, as a government program there is considerably more to consider. As a pharmacy owner, or buyer, when you want to discuss funding your pharmacy with an SBA Loan, contact us.