A federal loan-guarantee program administered by the U.S. Small Business Administration under which approved private lenders extend financing to eligible small businesses and the SBA guarantees 75 to 85 percent of the outstanding loan balance. The program is the most common financing vehicle for small business acquisitions under $5 million. Loan proceeds may fund the purchase price, working capital, and certain closing costs. Borrowers are required to provide an equity injection, typically 10 percent of the total project cost. Maximum loan amount is $5 million. Interest rates are indexed to the WSJ Prime Rate plus a lender spread. (Also see: equity-injection, dscr, sba-guarantee-fee, plp-lender.)
Deal Structure & Financing
SBA 7(a) Loan
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