SBA 7a Parameters
Our SBA 7a program is not credit score driven. The only requirement is that the borrowers shows an ability to repay back the loan. For existing businesses we will want to see a debt service coverage ratio of 1.15. The DSCR is calculated by dividing the property’s annual net operating income (NOI) by a property’s annual debt service. Annual debt service is annual total of your mortgage payments (i.e. the principal and accrued interest, but not your escrow payments). For example: Assume NOI of $20,000 and debt payments of $15,000. The DCR is 1.33, ($20,000/$15,000 = 1.33).
SBA 7A Loans – General Parameters
- Real estate purchase
- Business acquisition and business expansion
- Construction
- Recapitalization
- Refinance
- Partner buyout
- Start-ups
- Turn-arounds
- Working capital
- Inventory
- Machinery and equipment
Wiseman Capital Group uses the following criteria to determine if a business qualifies as a small business that is eligible for SBA loan assistance:
- Construction – Average (three years) annual sales or receipts of not more than $12 million to $28.5 million, depending upon the specific business type;
- Manufacturing and Mining – Depending on the industry, approximately not more than 500 employees
- Retail or Service – Depending on the industry, average (three year) annual sales or receipts of not more than $6 million up to $29 million
- Wholesale – Not more than 100 employees
- Special Trade Contractors – A limit of $7 million
- Agricultural Industries – A limit of $.5 million for most agricultural industries.
Use of Proceeds/Ineligible Use of Proceeds:
The proceeds of a 7(a) loan may be used by a new or existing business to do the following:
- Construct commercial buildings
- Expand or renovate facilities
- Finance receivables and supplement working capital
- Finance seasonal lines of credit
- Purchase machinery, equipment, fixtures, and leasehold improvements
- Purchase land or buildings
- Refinance existing debt, under some circumstances.
The proceeds of a 7(a) loan may not be used for the following purposes:
- For a non-sound business purpose
- To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow
- To make a partial change of ownership or change in the business that will not benefit the business
- To refinance existing debt where the lender might sustain a loss and the SBA would cover the loss through refinancing
- To permit reimbursement of funds owed to any owner of the business.
