SBA 7(a) Loans: A White Paper Guide for Borrowers - Home
An Exhaustively Researched White Paper Guide to SBA 7a Loans for Borrowers – Using Primary US Government Sources
By Jeff Bardos, CEO, Speritas Capital
January 4, 2021 – Greenwich, Connecticut
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Welcome to the home page of our SBA 7a loans White Paper!
Our financing clients asked for help understanding SBA 7a loans and we answered the call by creating this White Paper. The result is an exhaustively researched guide to SBA 7a loans to combat the often dated and sometimes incorrect information you’ll find online about SBA Loans.
As Sgt. Joe Friday says on Dragnet – “All we know are the facts, ma’am.“
There are a total of 7 pages of information on a variety of SBA 7a related topics - the ones we tend to receive the most questions about.
We hope this helps you understand if an SBA loan is the right direction - or even an option - for your company’s financing. While facts are easy to understand, the hard part is sometimes applying those facts to your own situation. Don’t hesitate to reach out if you have questions.
The Small Business Administration offers six types of programs designed to support small businesses, including the 7(a) program.
To quote the Congressional Research Service “these loan guaranty programs are designed to encourage lenders to provide loans to small businesses that might not otherwise obtain financing on reasonable terms and conditions.”
In short, the SBA helps businesses get loans after they’ve been turned down by other lenders.
And while the SBA offers many programs, in this White Paper, we’re ‘following the money’ and focusing on the largest and most popular program – SBA 7(a) loans – which are broad use term loans up to $5MM.
SBA 7a Loans 101
The SBA doesn’t lend money, it simply provides lenders with a partial guaranty so they are more willing to give a ‘less than perfect borrower’ a loan. If you default, the lender is partially covered – for up to 85% of the loan.
The SBA’s 7a loan guaranty program is the agency’s flagship loan program, named after Section 7(a) of the Small Business Act of 1953, which authorizes the SBA to provide business loans and loan guarantees to American small businesses. Roughly 80% of all SBA lending is through the 7a program.
Amounts up to $5MM to eligible businesses
Terms up to 10 years for business acquisition and expansion
Terms up to 25 years for owner-occupied real estate
Our SBA 7a Loans White Paper Sources
To create this white paper we relied strictly on primary research from Acts of Congress, Federal Regulations, Congressional Reports, legal documents, SBA Regulations & public notices, etc. If we add an opinion, it is clearly indicated as such and appears in italics.
When in need of clarification – or operational expertise – we’ve gone directly to the most knowledgeable SBA preferred lenders we know.
Some of our primary sources are listed below – we won’t bore you with a full list:
The Congressional Act H.R. 5141 (83rd Congress), passed on July 30, 1953, establishing the SBA
The SBA SOP 50 10 6 Lender and Development Company Loan Programs, effective October 1, 2020 – 587 pages. This document contains the SBA’s eligibility requirements for lenders and CDCs and the policies and procedures governing the CDC/504 and 7(a) loan programs. Highlights of changes to this document from previous SOP.
Report from the Congressional Research Service prepared for members of Congress R41146 – Small Business Administration 7(a) Loan Guaranty Program, updated June 21, 2021 – 48 pages.
Code of Federal Regulations – CFR (the codification of the general and permanent rules published in the Federal Register by the departments and agencies of the Federal Government) CFR Title 13, Volume 1, Chapter 1, parts 1-199. Updated June 7, 2021.
SBA 7(a) and 504 fee documentation information – updated SBA form 159 effective August 2021.
115th Congress: H.R.4743 – Small Business 7(a) Lending Oversight Reform Act of 2018, June 21, 2018 and Senator James Risch’s Committee Report 115-265
The Federal Register – Amendment and Implementation of the SBA 7(a) Lending Oversight Reform Act of 2018. Rule added April 15, 2020.
Congressional Research Service, Report prepared for Members & Committees of Congress
Title: Small Business Size Standards: A Historical Analysis of Contemporary Issues
Updated June 15, 2022 – 44 pagesCongressional Research Service Report, prepared for Members & Committees of Congress
Title: COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options
Updated May 31, 2022 – 55 pages
By Robert Jay Dilger
How Big is the SBA 7a Loan Program?
In Fiscal Year 2020 (October 1 – September 30, 2020), the SBA approved 43,302 7(a) loans totaling $22.6 billion dollars. The average approved amount was $533K.
In Fiscal Year 2019 (October 1 – September 30, 2019), the SBA approved 51,907 7(a) loans totaling $23.2 billion, slightly less than the $25.4 billion approved in FY 2018 with a total of 60,354 loans (a significant drop).
In contrast, the SBA approved just $5 billion in 504 loans in FY 2019, up slightly over 2018.
(Source – Report from the Congressional Research Service, primer on programs & funding updated March 18, 2021 and the CRS SBA 7(a) program updated June 21, 2021.
SBA 7a Program Growth Over Time
The importance of small business health and growth to the US economy is undisputed. Congress regularly approves legislation that increases the 7a program’s authorization limit on disbursements.
$18.7 billion in FY2014
$23.5 billion in FY2015
$26.5 billion in FY2016
$27.5 billion in FY2017
$29.0 billion in FY2018
$30.0 billion in FY2019
$30.0 billion in FY2020 (not including supplemental funding*)
$105.0 billion in FY2021 (not including PPP funding*)
*The SBA received supplemental appropriations FY2020 and FY2021 to assist small businesses adversely affected by the COVID-19 pandemic. P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other provisions, created the $349 billion (now $806.45 billion) Paycheck Protection Program (PPP) and appropriated $17 billion for six-month payment relief for existing 7(a), 504/CDC, or Microloan borrowers
Questions about SBA 7a Loans? Schedule a call with the author Jeff Bardos now.
SBA Leadership & Fun Facts
Current head of the SBA: Isabella Casillas Guzman was nominated by President Joe Biden and confirmed as the 27th Administrator of the U.S. Small Business Administration on March 16, 2021, and approved by the senate 81-17. She is the 8th woman to lead the SBA out of 27 administrators.
Prior to Guzman, acting SBA Administrator Chris Pilkerton held down the SBA fort while SBA staffers patiently awaited the senate confirmation of the 2020-2021 SBA Administrator, Jovita Carranza.
Carranza was nominated by former Republican president Trump in April 2019 after Linda McMahon stepped down to run a super PAC supporting the former president’s re-election campaign.
Carranza wasn’t confirmed until January 7, 2020 – just in time to lead the SBA’s response to the COVID-19 recession. She was the 7th woman to lead the SBA.
You can read about the full history of SBA leadership here.
Fun Fact – 2017 presidential appointee Linda McMahon was the former CEO of World Wrestling Entertainment, Inc. McMahon was the sixth female administrator (of 25) since the SBA’s formation in 1953. She unsuccessfully ran for a seat in the US Senate (CT) in 2010. To celebrate her 60th birthday she jumped out of an airplane.
Not so Fun Fact - McMahon was approved & confirmed in three weeks, Carranza in 10 months (!), Guzman in one month.
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 30 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
CONTACT INFO
Jeffrey Bardos
CEO Speritas Capital Partners
Call/text Jeff at 203-247-4358
Email Jeff with your financing questions
Schedule a call with Jeff using our online scheduling tool.
Speritas Capital Partners specializes in complex credit, collateral and cash flow situations and we never take upfront fees.
Because Speritas Capital is a debt advisory firm, we have access to a wide variety of lending structures. We’re not beholden to any one lender or structure so we can use our creativity and experience to design a structure that truly fits the needs of our clients.
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