SBA 7(a) loans are used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business. Small business loans of this nature are vital to the economy.
Small business loans through the SBA 7(a) program typically have some type of equipment that can be used as collateral. While this isn’t always the case, many times the business will have some sort of equipment or specialty fixtures that add value to the core of the small business.
Small Business Loans and the SBA
Small businesses with equipment and trade fixtures have an advantage when getting approval for a small business loan. The collateral value adds security and the underwriter sees these small business loans as more favorable.
Small businesses with equipment and specialty fixtures can include Physicians, Dentists, Veterinarians, Funeral Homes, Restaurants, Assisted Living Facilities, other medical and dental practices and the list goes on and on.
The bottom line with SBA 7(a) is that whether the small business has standardized equipment, trade fixtures, special or medical equipment or anything in between, having equipment as part of the business can be a real boost to the terms of the small business loan a business receives.
Small Business Loans – Eligible Uses
Eligible uses of SBA 7a loan proceeds include (this is a non-exhaustive list):
- The purchase of land or buildings
- New construction
- Expansion or conversion of existing facilities
- The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
- Long-term working capital, including the payment of accounts payable and/or the purchase of inventory
- Short-term working capital needs, including seasonal financing, contract performance, construction financing and export production
- Financing against existing inventory and receivable under special conditions
- The refinancing of existing business indebtedness that is not already structured with reasonable terms and conditions
- To purchase an existing business
Small Business Loans and SBA loan exclusions
SBA loans cannot be used for any of these purposes:
- To refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing
- To effect a partial change of business ownership or a change that will not benefit the business
- To permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business’s continuance until the loan supported by SBA is disbursed
- To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow
- For a non-sound business purpose
If you are unsure whether or not your anticipated use of funds is allowed, just ask us!