Understanding The Requirements For A 7(a) Loan

by | Aug 25, 2014 | Finance

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If you own a business you may be eligible for 7a loans that are offered through the U. S Small Business Administration, also known as the SBA. Applying for and being granted these loans through the SBA is based on several different criteria including aspects of the business as well as financial status of the business owners.

In general to qualify for 7a loans a business has to be a for-profit company. This means that non-profit or not for profit entities are not eligible for these types of loans. In addition banks and financial institutes, especially if they lend money, are not eligible. Any type of payday lender or short term lending agency is not eligible for 7a loans.

Other Eligibility Factors

The SBA will look at a range of different factors to determine if a business is eligible for a loan providing they are a for profit company. Most of these factors will be part of any business plan but they do not define or restrict the business type other than require the business to be considered small. Under SBA terms small includes various components but is regulated by the standards set forth in Title 13, Code of Federal Regulations, part 121. The exact standards vary based on industry and types of economic activity.

You will need to demonstrate that the 7a loans proceeds are going to be used for business purposes and that there is a need for the funds. To show this you will have to show that any alternative investment or funding sources, including personal assets, have be utilized to their fullest extent before being approved.

Disqualifying Factors

There are some factors that automatically disqualify a business from obtaining 7a loans even if they meet the eligibility requirements. If a business owes any money in the form of debt to the U.S government they will not be approved for a loan. In addition if the business shows no invested equity or is located in a foreign country the loan application will be denied.

Other types of businesses including gambling businesses, pyramid sales companies, life insurance companies, or businesses that focus in on political lobbying or religious teaching, instruction or counseling are also not eligible for 7a loans.