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Small Business Loans: Eligibility and how to apply

Getting a business loan can be complex because the process and lending rules require time and attention. Breaking it down into manageable steps – from understanding the requirements to shopping for lenders to knowing how to apply for a small business loan – can help you get the funding your business needs.

7(a) loans are the most basic and widely used type of loan in the Small Business Administration’s (SBA) business loan programs. Its name comes from Section 7(a) of the Small Business Act, which authorizes the agency to make business loans to U.S. small businesses.

They are designed to assist for-profit businesses that are unable to obtain other financing from other sources.

Who is eligible for 7(a) Small Business Loan?

The requirements of eligibility are based on aspects of the business, not the owners. So, SBA provides loans to businesses, not individuals. All businesses that are considered for financing under SBA’s 7(a) loan program must:

  • Meet SBA size standards
  • Be for-profit
  • Not already have the internal resources (business or personal) to provide the financing, and be able to demonstrate repayment.

Certain variations of SBA’s 7(a) loan program may also require additional eligibility criteria.

What is your credit score?

You can get your credit report for free at each of the three major credit bureaus – Equifax, Experian and TransUnion. You can also get your credit score for free from several credit card issuers and personal finance websites, such as NerdWallet.

When to get a business loan from online lenders:

  • You lack collateral.
  • You lack time in business.
  • You need funding quickly.

Online lenders provide small-business loans and lines of credit from about $1,000 to $5 million.

The loan terms for 7(a) Small Business Loan

The maximum length of the loan is 25 years for real estate and seven years for working capital. The maximum loan amount is $2 million.

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