SBA 7(a) Lenders For Startups
Some banks and other lenders that specialize in SBA 7(a) loans for startup companies include Huntington National Bank, Newtek Small Business Finance, Chase Bank, U.S. Bank, The Piedmont Bank, Regions Bank, Bank of America, 21st Century Bank, Central Bank and Pursuit Lending.
SBA 7(a) Lenders for Startups
1. Huntington National Bank
- Huntington is a "full-service banking provider primarily operating across a seven-state banking franchise of Ohio, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia." It is the top SBA 7(a) lender in the region consisting of "Illinois, Indiana, Kentucky, Ohio, Michigan, West Virginia, Western Pennsylvania and Wisconsin", as well as among the most active SBA 7(a) lenders in the US by volume.
- They provide SBA 7(a) loans for borrowers who want to expand, acquire or open small business. The minimum loan amount they offer is $5,000, whereas the maximum amount is $5 million. Moreover, their loan terms last up to 300 months.
- In 2020, Huntington National Bank approved 787 SBA 7(a) loans, with an approval amount of $150.6 million. This made it the bank with the most approved SBA 7(a) loans in the US.
2. Newtek Small Business Finance, Inc.
- Newtek is an online lender that is among the top online SBA lenders in the US, and among the most active SBA 7(a) lenders in the US by volume. It typically works with industries that are considered high risk by banks, such as construction and wholesaling.
- The minimum loan amount they offer is $10,000, whereas the maximum amount is $10 million. Moreover, their loan terms last 84 to 300 months and startups need to make a down payment of 30% of the business expense they are funding.
- In 2020, Newtek Small Business Finance approved 222 SBA 7(a) loans, with an approval amount of $146.9 million.
3. Chase Bank
- Chase Bank is an "SBA preferred lender with approximately 5,100 branches in 23 states". It is among the top SBA lenders for startups, offering SBA loans to newer businesses and startups regardless of how long they have been in operation.
- Their SBA 7(a) loans can be used for business acquisition, business expansion, working capital or purchasing equipment and real estate. The maximum loan amount is $5 million.
- The average loan amount they offered in FY 2019 was $250,313, the total amount was $473.1 million and there were 1,890 loans approved. Their average interest rate is 8.5% and average loan term is 10 years.
4. U.S. Bank
- U.S. Bank offers SBA 7(a) business loans for the acquisition or expansion of small businesses. Startups with less than a year in business may qualify for an SBA loan at U.S. bank if they have collateral.
- The maximum loan amount is $5 million, and their loan terms last up to 7 years for inventory and working capital, and up to 10 years for acquisition, equipment, business or tenant improvement.
- In 2020, U.S. Bank approved 426 SBA 7(a) loans, with an approval amount of $74.6 million. This made it the bank with the second-most approved SBA 7(a) loans in the US.
5. The Piedmont Bank
- "Recognized as a preferred lender by the U.S. Small Business Administration (SBA)", the Piedmont Bank approves loan requests on behalf of the administration. They offer SBA 7(a) loans to for-profit small businesses such as independent and franchise businesses, retailers and other service businesses, wholesalers and manufacturers. The loan can be used to finance startups, expand businesses, or to buy or construct business facilities.
- The minimum loan amount they offer is $200,000, whereas the maximum amount is $5 million. Moreover, their loan terms last from 10 to 25 years.
- In 2020, The Piedmont Bank approved 6 SBA 7(a) loans, with an approval amount of $11.4 million.
6. Regions Bank
- Region Banks offers the SBA 7(a) loan for startups and small businesses. Their loans can be used for debt refinance, inventory, leasehold improvements, working capital, business acquisitions and equipment.
- The minimum loan amount they offer is $350,000, whereas the maximum amount is $5 million. Moreover, their loan terms are 7 years for working capital and 10 years for equipment purchases.
- In 2020, Regions Bank approved 32 SBA 7(a) loans, with an approval amount of $54.4 million.
7. Bank of America
- Bank of America offers SBA 7(a) loans for new ventures, specifically those that have been in business for less than 2 years.
- Their loans for working capital, inventory and equipment have a minimum amount of $25,000 and a maximum amount of $350,000. They have terms of up to 7 years for inventory or working capital, and up to 10 years for equipment.
- Their loans for acquiring or expanding businesses have a minimum amount of $200,000 and a maximum amount of $5 million. They have terms of up to 10 years for business acquisitions.
8. 21st Century Bank
- 21st Century Bank offers SBA 7(a) loans to startups to fund working capital and equipment, among other items. The bank is among the select SBA Preferred Lenders, and is among the top 10 lenders in Minnesota.
- They have a maximum loan amount of $5 million and terms up to "7 years for working capital, 10 years for equipment, and 25 years for real estate."
9. Central Bank
- Central Bank in Utah offers SBA 7(a) loans to startups and entrepreneurs, to be used for working capital, acquiring or expanding businesses, buying buildings and land, debt refinancing and purchasing furniture, supplies, machinery, fixtures or materials.
- The maximum loan amount is $5 million, and the requirements include industry experience for the borrower, collateral, and good credit and business financial history.
10. Pursuit Lending
- Pursuit Lending is a lender that offers innovative lending services to business owners in New York, New Jersey and Pennsylvania. It provides SBA 7(a) loans to startups in industries that are perceived as risky.
- The requirements for the loan include collateral, a fair or good credit core, positive projected or historic cash flow, and positive net worth or available equity.
- Their loans can be used to buy inventory, equipment, owner-occupied commercial real estate, fixtures and furniture; improve and renovate leaseholds, acquire businesses, refinance debt, maintain working capital. The minimum loan amount they offer is $50,000, whereas the maximum amount is $5 million. Moreover, their loan terms last 10 years for general funding and 25 years for real estate.
SBA 7(a) Loans for Startups
How They Work
Who Provides The Loan
- SBA 7(a) loans are government-backed loans for small businesses. However, they are not issued directly through the U.S. Small Business Administration (SBA). The SBA guarantees a percentage of loans that are provided through their lending partners, typically lending institutions such as banks and credit unions, among others. In this way, they make it less risky for the lenders to provide financing.
- The eligibility criteria for SBA 7(a) loans are a bit restrictive for startups and financial services-related businesses. Most banks do not lend to startups with less than two to three years of financial statements and those without owner's equity. However, some banks still cater to businesses that have been operating for less than two years, and even those that haven't been started yet if they have strong qualifications.
- SBA 7(a) loans are targeted at companies with "less than $7 million in tangible net worth and less than $2.5 million in net income".
- They also generally require good credit and strong financials.
- The SBA guarantees loans less than $150,000 up to 85% and those over $150,000 up to 75%.
- SBA 7(a) loans can be used to buy land that will be used in the business for a specific purpose in the future. They can also include construction costs.
- SBA 7(a) loans can be used to pay off loans in a single payment rather than recurring payments, leading to lower interest and a longer term.
Loan amount and maturity
- SBA 7(a) loans are provided in amounts up to $5 million and terms up to 25 years. Startups can get a lot of money if they can provide proof of their potential.
- SBA 7(a) loan range from 8% to 13% in general. Generally, if a loan is less than $25,000 with maturity less than 7 years, borrowers pay base plus 4.25%; and $50,000 loans maturing in over 7 years are base plus 2.75%. Interest rates are either fixed or variable.