5 Criteria for the SBA Loan 7

The SBA loan 7 is one of the Small Business Administration's financing programs offered to small American companies. To apply for this grant, you and your business must meet certain eligibility criteria that the loan requires.

1. Borrower's repayment ability - The SBA loan 7 is funded by commercial or private lenders and is guaranteed by the federal government. The primary deciding factor that is considered by lending institutions is the borrower's repayment ability. A strict evaluation of the company's financial statement which contains; the balance sheet, profit and loss statement and income statement will be conducted. The company's cash flow should is examined to insure there is sufficient capital to pay back the loan. A business with a satisfactory financial record for three years has a good chance of approval.

2. Good character and management capability - A detailed resume of the business owner or manager is another important key to approval. Each key management member's educational background and business experience will be analyzed. Owners should demonstrate excellent managerial skills and trustworthiness. Additionally, they should not have a criminal record or bad credit history.


3. Size and type of business -
The company's size and type of business should meet the standard criteria set by the government in able to become eligible for the SBA loan 7. A "table of small business size standard" guideline is established to determine if a company qualifies for a business financing from the agency. The size standard is typically determined by the number of employees or the average annual receipts of the business. The company should also operate to generate profit and be located within the United States. Certain types of businesses are classified under special considerations. They include franchises, recreational facilities and clubs, medical facilities, agricultural businesses and fishing vessels.

4. Collateral -
A list of collateral is required to secure the loan. Lenders want to make sure that if the first source of repayment fails (which is the cash flow), the second source in the form of collateral can pay back the capital. Collateral can be real properties or valuable assets. Buildings, machinery and equipment, accounts receivable, and business inventory are types of assets that can be pledged to secure the loan. The owner's personal assets can also be used as another source of the loan's guarantee. Owners of at least 20% of the business are required to personally guarantee the SBA loan 7.

5. Use of proceeds -
Use of funds is generally scrutinized during the application. Therefore, the borrower should see to it that the loan will be utilized to fund the eligible proceeds as directed by the government. The SBA loan 7 can only be capitalized to create a new business, purchase equipment, buildings, land, and facilities to assists business operation, acquisition of an existing business, refinancing of existing debts, and finance working capital.