SBA Community Advantage 7a Loans

If you have big plans for your small business, UCEDC’s SBA Community Advantage 7a loan program may be the answer.

mechanic-in-garageUCEDC is among a select group of SBA lenders in the nation to offer this program, designed to encourage business growth and job creation. We fund long-term loans of $50,000 to $250,000  to start-up (in operation less than two years) and established businesses in New Jersey.

With low down payments and flexible collateral requirements, Community Advantage 7a loans can help you grow your business when you can’t qualify for conventional financing.

Because the SBA provides us with a guarantee on a portion of the loan amount, we are able to approve loans that otherwise would not be eligible.  However, applicants must still clearly demonstrate an ability to repay the entire loan amount.

Who can apply?

Generally, for-profit businesses that meet the SBA’s small business size definition are eligible to apply.  Non-profit entities, religious institutions, real estate investors, and financial institutions do not qualify.

How can the loan be used?

Funds can be used for a wide variety of purposes including:

  • working capital;
  • furniture/fixtures, machinery and equipment;
  • renovation, purchase or construction of land and building
  • leasehold improvements (100% borrower occupied)
  • business acquisition
  • refinancing of debt for compelling reasons

What will this cost me?

Several elements go into determining the cost of borrowing in the Community Advantage 7a loan program.  Some of these costs are unique to the program and others are typical of any business loan process.

Interest Rate:  Rates are set at Prime + 3 – 4%, based upon credit quality, and are adjusted quarterly.

Term:  7 – 10 years with the exception of real estate, which has a 20-year term.  No prepayment penalties for loans under 15 years.

Equity Contribution:  Borrowers are expected to contribute a minimum of 10% (certain circumstances will warrant a higher contribution).  This is a significant cash flow benefit to the borrower as most commercial lenders require 20-30%.  Closing costs and fees can be applied to the equity contribution.  Excess costs and fees (above 10%) can be financed as part of the loan.

Collateral:  The SBA requires that all personal and business assets and personal guarantees are offered to secure the loan.  However, insufficient collateral will not necessarily preclude approval.

Packaging Fee:  $1,500 to $2,500 depending on the amount of the loan and complexity of the transaction.  This fee is payable upon submission of a completed loan application and is non-refundable once we agree to move forward with your application.

SBA Guarantee Fee:  If your loan application is approved, you will be charged a one-time fee, payable to the SBA.  That fee is based on a percentage of the guaranteed portion only of the loan amount.

Loan Amount SBA Guarantee Guarantee Fee
Up to $125,000 85% No fee
$125,001 – $150,000 85% 2.0%
$150,001 – $250,000 75% 3.0%

Other Expenses:  Depending on the nature of the project or use of funds, other expenses could include business valuations, commercial property appraisals, and environmental assessments.  Additionally, attorney closing costs can range from $1,500 to $3,500.

What paperwork will I have to submit?

UCEDC and the SBA are looking for evidence that your business is well-run, that you have the ability to pay back the loan, and that the loan proceeds will be used constructively to grow your business.

In addition to the SBA loan application form, you will be asked to complete other SBA forms, provide copies of various records, and submit supporting materials.  The following is a list of documents that typically accompany a completed SBA application package:

  • Personal background and financial statements
  • Business Financial Statements, including Profit & Loss and Financial Projections
  • Ownerships and Affiliations
  • Business Certificate/License
  • Loan application history
  • Income tax returns
  • Resumes of principals
  • Business overview and history, including why loan is needed and how it will help the business
  • Business lease

What’s the next step?

Speak to one of our loan officers by calling 908-527-1166.  They will explain the process and review the eligibility requirements with you. If the Community Advantage 7a loan is right for you and your business, we’ll work together to get you an answer as quickly as possible.