Are you a manufacturer using cash to purchase raw materials? Are you a tech start up "starving" for working capital? Revenue for business operations in many cases may not be available until the product is out on the market. The 7(a) program assists most companies regardless of their life cycle and industry trends such as business acquisition, expansion of an existing one, debt refinancing or funding for daily operations. In general, businesses in trade or logistics have a higher need of cash flow and as Jason Solarez, NB|AZ® Business Banker recommends "(…) a manufacturer that is using cash to purchase raw materials may not see any profits from that inventory for weeks, even months. A line of credit would be a great tool to temporarily fill that gap between when the business pays for its goods, and when it makes profit from those goods or finished product."
With a 25-year repayment period and a borrowing limit of $5 million dollars, the 7(a) Standard Loan could help businesses fill their financial gaps. The SBA guarantees 85% on amounts up to $150K and 75% over $150K. A combination of fixed and trading assets can be used as collateral to secure the loan such as commercial real estate, inventory, machinery, equipment and even personal assets.
Maybe you need only $150K to cover temporary expenses? In this case, the small loan might be a good idea. The most you can take out is $350K and it has the same terms as the standard loan. If you need less than $25K, there’s no collateral requirement. Small seasonal or cyclical businesses can benefit from a 7(a) loan because of its flexible repayment term allowing them to operate during offseason.
Express SBA Program
The SBA Express Program can help you move forward within hours of your loan or line of credit application. If lending conditions are met, your business can be funded within 36 hours for amounts up to $350,000. The terms vary between up to seven years for lines of credit to 10 years repayment for loans. To qualify for the loan or line of credit, the business needs to be well established with strong credit, above 80 up to 100 on a D&B PAYDEX scale.
Loans for international trade
The Export Working Capital program and the International Trade loan assist growing export sales or upgrade existing ones due to overseas competition. Both options offer generous credit limits, up to $5 million, with a fund availability ranging between five to 10 business days.
In terms of collateral, the Export Working Capital program requires production status which means inventory, account receivable backed by sales and proof of at least 20% ownership in the company. The International trade loan matures in 10 years if borrowed for machinery, equipment or working capital and no more than 25 years for commercial real estate.
International trading can be fast paced and require funds to be available right away. The Export Express loan or line of credit might be a better choice for these circumstances because approval time is only 24 hours, for proceeds up to $500K.
If you have been in business for at least two years, the 7(a) General Small Business Program can be an affordable and flexible option for your business financial needs. For customized advice, we recommend contacting a banker or click here for more information on the 7(a) loans at National Bank of Arizona.