An SBA Loan is a small business loan that is a secure and reliable way to get funds to expand your new business. There are several loans offered by SBA, and you can choose the one that suits your needs. For buying a business, you can use the SBA 7 (a) loan. There are many advantages of purchasing an existing business because you do not have to put many efforts into it. However, buying an existing business requires capital, and you can get by applying for the SBA loan.
What is SBA 7 (a) loan?
SBA 7 (a) loan is provided by credit unions and banks to help entrepreneurs can establish their business. This loan is used for various purposes such as to buy lands, equipment, working capital or to buy an existing business etc.
The procedure to qualify for the SBA 7 loan is quite lengthy. But these loans are an ideal option to run business in an efficient manner. It is the best loan to finance your enterprise. Furthermore, proper counselling is also provided.
How to qualify for SBA 7 loan?
If you are applying for SBA loan to buy an existing business, then you do not have to worry much about it. The track records of the business that you are thinking to buy are clear and available, so it will be easy for SBA to determine your eligibility for the loan.
However, when you are planning to establish a business from scratch, then the qualification procedure for acquiring an SBA loan is quite tough.
The SBA 7 loans have feasible closing costs, repayment terms and interest rates. In order to qualify for the loan, one must have a credit score above 690. The borrower must pay 10% down payment. Your track record should be free from any corporate bankruptcies. You must have experience in the industry and managing the business that you wish to buy.
Furthermore, an individual can apply for SBA 7 loan if he has a clean reputation. That means he should be involved in any illegal activity.
What type of business can you buy with SBA 7 loan?
To buy an existing business with the help of SBA loan, you must follow the guidelines provided by SBA. The business that you are planning to buy must be an operating one. Moreover, the business must have the capacity to generate profit.
Another criterion is that you cannot buy a newly established business with the SBA 7 loan. The business must be established for two to five years.
Which documents are required to apply for an SBA 7 loan?
You need to submit the documents regarding the business contracts, assets, debts, lease agreements and business plan etc. All the financial statements, the balance sheet and profit loss must be included in the documents.
Once you have made up your mind that SBA 7 loan is the best option for you, you can contact the lender to get started with the process.