What is a 7(A) Loan Program?

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The 7(A) loan program is a loan program offered by the Small Business Administration. Also known as the SBA, the Small Business Administration is a branch or department of the government that provides assistance to business owners and those who want to open their own companies. The SBA created this program as a way to help those who opening a start-up company and those who own an existing small business. It’s important to look at who qualifies for these loans, how the program works and other factors.

Who Qualifies for the Loans?

Those who qualify for this loan program must own and operate a for-profit business, which means that the company turns or attempts to turn a profit each year. They must also have a license to operate within the United States and have some type of equity built up within the company. When you apply for a loan through this program, you must also show that you do not owe any money to the government in connection with your business and explain how you will use that money to pay for costs relating to your business.

How Can You Use the Funds?

The SBA requires that you use the funds you receive via the 7(A) loan program to run your business. When you fill out the application to apply, you’ll have the chance to explain how much money you need and what you will use those funds for in the future. Those who own start-up companies may use the funds as a way to pay for overhead and operational costs, including rent on a new office space and equipment rentals or purchases. If you own a small business, you can use the funds to pay for new supplies, equipment, production costs or any other costs associated with running your company.

How Does the Program Work?

This loan program is fairly unique because the SBA does not have cash on hand and will not give you a loan from its own supply of cash. The SBA actually acts as a middleman between you and a lender. When you apply for a loan, the SBA guarantees that you will pay that loan back. If your business fails, you file for bankruptcy or you just stop paying on the loan, the SBA will step up and pay off the loan. The SBA also gives you the right to select the lender you want to go through when securing your loan.

Are There Any Special Loans?

In addition to the standard or traditional 7(A) loan program, the Small Business Administration also offers several types of specialty loans. SBA Export Loan Programs are new programs designed to assist companies that handle the export of products to nations around the world, and the CAPLines program provides companies with funds they can use to cover the capital necessary for operating costs and other expenses. There are also several community programs that help those in specific cities and rural programs for those running businesses outside of urban settings.

Related Resource: R&D Tax Credit

The Small Business Administration offers loans and loan programs that assist those who own and operate small businesses in the United States. One of its more popular programs is the 7(A) loan program, which guarantees loans that you take out from lenders and provides you with cash you can use for start-up costs and other expenses.

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