SBA loan terms: questions and answers

All 16 answers on SBA loan terms

Each entry gives the short answer. Open it for the full explanation and its sources.

What is the longest term on an SBA 7(a) loan?

The longest standard term is 25 years, plus any reasonable construction or renovation period, for real estate. Working capital and most equipment are capped at 10 years. SOP 50 10 8.1, Appendix 17 and 13 CFR § 120.212 set the limits.

How long can an SBA loan for working capital run?

Up to 10 years. SOP 50 10 8.1, Appendix 17, Para. A.1 applies that limit to working capital, inventory and intangible assets, including goodwill. Your lender can set a shorter term.

How long can an SBA loan for equipment run?

Generally 10 years, or up to 15 years if the IRS asset class useful life supports it. SOP 50 10 8.1, Appendix 17, Para. A.2 also allows up to 12 extra months for installation.

How long can an SBA 7(a) real estate loan run?

Up to 25 years, plus any reasonable construction or renovation period. That limit covers buying, rehabilitating, renovating, constructing or improving real estate, under SOP 50 10 8.1, Appendix 17, Para. A.3 and 13 CFR § 120.212(c).

How long can an SBA loan for leasehold improvements run?

Up to 10 years, plus up to 12 months to complete the improvements. SOP 50 10 8.1, Appendix 17, Para. A.4 sets that limit. Improvements to a leasehold interest in land are treated as real estate, with a 25-year maximum.

How does SBA set the term when one loan has several uses?

The term may be a blended maturity, or up to 25 years if 51% or more of the proceeds are for real estate. SOP 50 10 8.1, Appendix 17, Para. A.5 sets this. Loans that finance a change of ownership follow Appendix 15 instead.

Which SBA loan programs have their own maximum terms?

Several do. SOP 50 10 8.1, Appendix 17, Para. B sets 20 years for Manufacturers' Access to Revolving Credit (MARC) loans, 36 months for Export Working Capital Program (EWCP) loans and 10 years for most CAPLines. SBA Express lines have their own limit too.

Does my SBA lender have to give me the maximum term?

No. SOP 50 10 8.1, Appendix 17 requires the shortest appropriate term based on the use of proceeds and the borrower's ability to repay. The 10-year and 25-year figures are ceilings, and your lender sets the actual term within them.

Can the maturity on an SBA loan be extended later?

It can, within limits. 13 CFR § 120.212(c) caps the term at 25 years including extensions. Extending a short-term loan past 12 months adds a guaranty fee under SOP 50 10 8.1, Section A, Chapter 4, Para. C.1.

Can an SBA loan have a balloon payment?

No. SBA does not allow balloon payments on 7(a) loans, under 13 CFR § 120.214(e) and SOP 50 10 8.1, Appendix 18. A 7(a) loan can, however, refinance balloon debt you already have.

How is an SBA 7(a) loan amortized?

The lender uses a schedule that fits the loan, and the loan must be repaid by maturity. SOP 50 10 8.1, Appendix 18 says fixed-rate payments must fully amortize, and variable-rate loans are typically re-amortized at each rate change.

Can an SBA loan have an interest-only period?

Yes, if your Note states it. SOP 50 10 8.1, Section B, Chapter 6, Para. D.2 lists any interest-only payment period among the Note terms. SBA sets no general length, and the loan still cannot end in a balloon.

How long can an SBA 7(a) loan to a farm run?

It depends on the use. When land and structures are 51% or more of proceeds, the maximum is 20 years. When machinery and equipment are 51% or more, it is the useful life of the equipment, up to 15 years. SOP 50 10 8.1, Appendix 17, Para. A.7 sets both.

How long do I have to draw an SBA loan after approval?

The SBA Terms and Conditions state the disbursement period. A 7(a) loan must be fully disbursed within 48 months of approval, or SBA cancels the undisbursed balance. SOP 50 10 8.1, Section B, Chapter 6, Para. D.1 sets this.

Can an SBA loan have a 25-year amortization with a 10-year term?

No. A 25-year schedule on a 10-year term leaves a balance due at maturity, which is a balloon. SBA does not allow balloon payments on 7(a) loans, under 13 CFR § 120.214(e).

Can my SBA loan payments follow my seasonal cash flow?

Possibly. SOP 50 10 8.1, Appendix 18 says the amortization schedule may be adjusted to meet the business's cash flow needs. Other amortization methods need SBA's prior approval under 13 CFR § 120.214(e), and balloon payments are not allowed.