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A/R Aging Report Guide1031 Exchange GuideLOC GuideSBA 7(a) GuideSBA 504 GuideSection 179 GuideSelling a Business
Setting an Asking PriceUsing a Business BrokerSelling a Business During DivorceSelling a Failing BusinessTransferring Intellectual PropertyPreparing an Online Business for SalePreparing for Sale, Two Years OutSelling a Business QuicklyWriting a Selling MemorandumSelling a Business Step by StepSelling a Business With DebtChanges Worth Making Before SellingEverything you need to understand what our SBA 7(a) calculator computes, how to enter your numbers correctly, and how to interpret the results to make a real financing decision.
The SBA 7(a) is the Small Business Administration's flagship loan program -- the most flexible and widely used form of government-backed small business financing in the United States.
The SBA does not lend money directly. Instead, it guarantees a portion of the loan made by an approved commercial lender -- typically 75-85% of the loan amount. This guarantee reduces the lender's risk, allowing them to extend credit to businesses that might not qualify for a conventional bank loan on the same terms.
The guarantee is backed by the U.S. government, but the loan is originated, underwritten, and serviced by the participating lender. The SBA sets program rules -- maximum rates, maximum terms, eligible uses, and borrower requirements -- while lenders apply their own underwriting standards on top.
Key point
The SBA 7(a) is designed for businesses that are creditworthy but lack sufficient collateral or down payment to qualify for conventional financing. The government guarantee compensates for what conventional lenders would consider insufficient security.
The SBA 7(a) has several sub-programs. Our calculator models the Standard 7(a) -- the most common, which covers loans from $500,000 to $5,000,000 with the full SBA guarantee structure.
| Sub-program | Max loan | Max guarantee | Key feature |
|---|---|---|---|
| SBA 7(a) Standard | $5,000,000 | 75-85% | Full underwriting, all eligible uses |
| SBA Express | $500,000 | 50% | Faster approval (36 hrs); lender uses own docs |
| Export Express | $500,000 | 75% | For businesses that export or plan to export |
| SBA CAPLines | $5,000,000 | 75-85% | Revolving credit lines for working capital |
| Export Working Capital | $5,000,000 | 90% | Transaction-based working capital for exporters |
| International Trade | $5,000,000 | 90% | For businesses that compete with imports or export |
The SBA 7(a) has some of the broadest eligibility criteria of any SBA program -- including startups and businesses with limited collateral. Here is what lenders actually look for.
Minimum credit score
650 -- 680
Typical lender threshold. Scores below 650 face steep headwinds. 680+ opens most programs. 720+ gets best rates.
Business age
No minimum
SBA 7(a) is one of the few programs explicitly accessible to startups. Lenders may still require a business plan and projections for < 2-year-old businesses.
Down payment
10% typical
SBA requires "equity injection" -- often 10% of total project cost. Startups and special-use properties may require 20-30%. Seller notes can sometimes count.
Collateral
Required if available
SBA requires lenders to take available collateral -- but insufficient collateral alone will not disqualify you. Lenders must take what exists. This is unlike conventional loans where a coverage gap kills the deal.
DSCR minimum
1.25x
Debt service coverage ratio: annual EBITDA / annual debt service must be at least 1.25x at close. Global cash flow (personal + business) is considered.
Business type
For-profit only
Must be a for-profit U.S. business. Cannot be in certain ineligible industries: gambling, lending, pyramid schemes, government-owned entities, passive investment businesses.
Ineligible businesses
The SBA explicitly prohibits 7(a) loans to: financial businesses (banks, lenders, life insurance companies), passive investment businesses (real estate that is purely held for investment), government-owned entities, businesses deriving more than 1/3 of revenue from gambling, and businesses engaged in pyramid sales schemes. Commercial real estate with an operating business as the primary tenant is eligible.
Our calculator models a standard fully-amortizing SBA 7(a) loan and builds a complete financial picture including payment, total cost, DSCR, APR, and amortization schedule.
Monthly payment formula
P × (r × (1 + r)^n) / ((1 + r)^n - 1)
Where: P = loan principal | r = monthly rate (annual rate / 12) | n = total months (term × 12)
This is standard amortizing loan math. Every payment covers accrued interest first; the remainder reduces principal.
DSCR (Debt Service Coverage Ratio)
Annual EBITDA / Annual Debt Service
Annual debt service = monthly payment × 12. DSCR of 1.25x means $1.25 of EBITDA for every $1.00 of annual payment. SBA requires 1.25x minimum. Lenders often stress-test at a higher rate.
APR (approximate, Newton-Raphson iteration)
Net proceeds = PMT × (1 - (1 + r)^-n) / r -- solve for r
APR is computed by finding the rate that makes the present value of all payments equal to the net loan proceeds after fees. The calculator runs ~50 Newton-Raphson iterations to converge. This is the true cost rate -- higher than the stated rate when fees are present.
Unlike a one-time upfront fee, the SBA also charges an annual guarantee fee on the outstanding guaranteed balance -- currently 0.55% per year. This is paid to the SBA by the lender and typically passed to the borrower. Our calculator includes this in the total cost of borrowing and factors it into the APR.
Total cost vs. monthly payment
The calculator shows both because they measure different things. Monthly payment determines whether the loan is serviceable from cash flow. Total cost (interest + all fees over life) shows the true price of the capital. A 10-year loan at 10.5% may have a lower monthly payment than a 7-year loan at 8.5% but a higher total cost -- our calculator shows both simultaneously.
| Field | What it is | Where to find it | Typical range |
|---|---|---|---|
| Loan amount needed | Total project cost minus your down payment. This is the amount you are borrowing -- not the total project cost. | Your business plan, purchase agreement, or contractor bid | $50K -- $5M |
| Down payment available | Your equity injection into the project. Can be cash, equity in existing assets, or sometimes a seller note. Shows as % of loan. | Your bank account / equity analysis | 10 -- 30% of total cost |
| Collateral value (FMV) | Fair market value of assets you can pledge as security. Real estate at current appraisal value. Equipment at forced liquidation value (often 50% of cost). | Recent appraisal, equipment schedules | 0 -- 200% of loan |
| Annual EBITDA / SDE | Earnings Before Interest, Taxes, Depreciation and Amortization -- or Seller's Discretionary Earnings for owner-operated businesses. This is your cash flow available to service debt. | Tax returns (Schedule C, 1120-S, 1120), add back D&A | $50K -- $2M+ |
| Personal credit score | The guarantor's FICO score. SBA 7(a) requires a personal guarantee from any owner with 20%+ ownership. The lowest score among guarantors often sets the threshold. | AnnualCreditReport.com, your bank, credit monitoring | 550 -- 850 |
| Years in business | How long the business has been operating. This affects lender risk assessment and required documentation, but SBA 7(a) has no statutory minimum. | Business formation date, tax filings | 0 -- 30 years |
| Loan purpose | What you will use the funds for. This affects the maximum term (real estate = 25 yr; equipment = 10 yr; working capital = 10 yr) and the fit score weighting. | Your business plan | 7 options |
| Real estate % of loan | What portion of the loan proceeds will purchase real property. Higher percentages favor longer terms and affect the SBA 504 comparison. | Purchase agreement or appraisal | 0 -- 100% |
| Field | What it is | SBA rules | Default |
|---|---|---|---|
| Interest rate (%) | The annual interest rate on the loan. SBA 7(a) rates are variable and float with Prime Rate. The spread (margin) is negotiated with the lender within SBA maximums. | Max: Prime + 2.75% (loans < 7 yr) / Prime + 3.75% (7+ yr) | 10.5% |
| Term (years) | The repayment period. Longer terms = lower monthly payment but higher total interest. SBA caps vary by purpose. | Max 10 yr (equipment, WC) / 25 yr (real estate) | 10 yr |
| Upfront guarantee fee ($) | One-time SBA fee on the guaranteed portion. Scales with loan size. Can be financed into the loan amount. Waived for loans under $150K and for veterans under $350K. | 0% (<$150K), 2% ($150K-$700K), 3% ($700K-$1M), 3.5% ($1M+) | $28,500 |
| Annual guarantee fee (%) | Ongoing annual fee charged on the outstanding guaranteed balance. Paid by lender, typically passed to borrower as part of the rate or as a separate fee. | 0.55% on guaranteed balance annually | 0.55% |
Tip: update the rate to your lender's quote
The default rate of 10.5% reflects current Prime + spread at the time this tool was built. Always update this to your lender's actual quoted rate before comparing programs. Request a rate lock quote in writing from at least two SBA-approved lenders.
The calculator produces seven sections of output. Here is what each number means and how to use it in a real lender conversation.
Section A -- Summary
Monthly payment
Principal + interest only. Does not include property taxes, insurance, or other escrow items a lender may require.
APR
True annualized cost including upfront fees amortized over the term. Use this to compare across programs.
DSCR
Your EBITDA divided by annual debt service. Green = 1.25x or above. Must be at least 1.25x to qualify.
Fit score
Weighted score (0-100) across 5 dimensions. Not a lender's decision -- a relative ranking vs. the other two programs.
Sections B-G
B: Payments
Detailed payment breakdown, annual debt service, rate type context, down payment requirements.
C: Total cost
Interest, fees, and ongoing guarantee fee broken out. "Interest per $1 borrowed" for cross-term comparison.
D: Amortization
Year-by-year: annual interest paid, principal paid, ending balance, cumulative interest, % remaining.
E-G: Score, Criteria, Recommendation
Fit score dimensions with bars and weights, 19-row criteria table comparing all three programs, scored recommendation with narrative.
Debt Service Coverage Ratio is the single most important underwriting metric for any SBA 7(a) loan. If your DSCR does not meet the minimum, the loan will not be approved regardless of credit score or collateral.
DSCR calculation
DSCR = Annual EBITDA / (Monthly Payment × 12)
Example: $300,000 EBITDA / ($22,500 monthly payment × 12) = $300,000 / $270,000 = 1.11x -- below the 1.25x minimum.
To fix: increase EBITDA (via add-backs or projections), reduce loan amount, extend term, or reduce the interest rate.
| DSCR range | What it signals | Likely outcome |
|---|---|---|
| 1.50x and above | Strong cash flow cushion. Debt service is well-covered even at higher rates or lower revenue. | Strong approval likelihood. May accelerate decisioning. |
| 1.25x -- 1.49x | Meets SBA minimum. Lender has standard coverage. Still approved with good credit and collateral. | Standard underwriting. Normal processing timeline. |
| 1.10x -- 1.24x | Below SBA minimum. Lender may require additional collateral, personal assets pledge, or co-borrower to bridge the gap. | Possible with compensating factors. Expect longer process. |
| Below 1.10x | Insufficient cash flow at current payment. Loan is not serviceable. Must restructure terms, reduce amount, or improve income documentation. | Decline likely without significant restructuring. |
Global cash flow
SBA lenders calculate "global cash flow" -- they add your personal income from all sources to the business EBITDA and divide by all personal and business debt obligations. If you have W-2 income, rental income, or other businesses, these improve your global DSCR. The calculator uses business EBITDA only; your lender will consider your full financial picture.
SBA 7(a) loans have a more complex fee structure than conventional loans. Understanding all three fee types prevents surprises at closing.
| Fee | Who charges it | Rate | When paid | Financeable? |
|---|---|---|---|---|
| SBA guarantee fee | SBA (via lender) | 0 -- 3.75% of guaranteed portion | At closing | Yes -- can be rolled into loan |
| Annual SBA fee | SBA (via lender) | 0.55% of outstanding guaranteed balance | Annually, life of loan | No -- paid each year |
| Lender origination | Bank / lender | 0 -- 3% (lender discretion) | At closing | Often financeable |
| Packaging fee | SBA loan packager | $2,500 -- $5,000 flat | At closing | Varies |
| Appraisal | Appraiser | $2,500 -- $10,000+ | At application or closing | No -- paid out of pocket |
| Environmental | Environmental firm | $500 -- $3,500+ | At application or closing | No -- paid out of pocket |
Guarantee fee scale
The SBA guarantee fee is charged on the guaranteed portion (not the full loan amount): 0% for loans ≤ $150K, 2% for $150K-$700K, 3% for $700K-$1M, and 3.5% for the first $1M of loans above $1M, plus 3.75% on the portion above $1M. For a $1,500,000 loan at 85% guarantee, the guaranteed portion is $1,275,000 -- resulting in a fee of approximately $31,875 (3.5% on first $850K + 3.75% on next $425K). Veterans are exempt on loans up to $350K.
SBA 7(a) rates are variable and tied to the Wall Street Journal Prime Rate. The SBA sets maximum spreads (margins) that lenders can add to Prime.
| Loan term | Max SBA spread | Rate structure | Current rate (est.) |
|---|---|---|---|
| Under 7 years | Prime + 2.75% | Floating; resets when Prime changes | 11.25% (Prime 8.5% + 2.75%) |
| 7 years and over | Prime + 3.75% | Floating; resets when Prime changes | 12.25% (Prime 8.5% + 3.75%) |
| Under $50K | Prime + 6.5% | Smaller loans carry higher spread | 15.0% |
Some lenders offer fixed-rate SBA 7(a) loans, typically for shorter terms (5-7 years). These carry a higher initial rate than the variable equivalent but protect against rate increases. Fixed-rate 7(a) loans are less common and are underwritten differently.
Rate risk on variable loans
If you borrow at Prime + 2.75% and Prime increases by 200 basis points, your rate increases by 200 basis points. On a $750,000 loan, a 2% rate increase adds approximately $1,000/month to your payment. Our calculator lets you model this: simply enter the stressed rate in the interest rate field to see the impact on your DSCR and monthly payment.
Business acquisition
SBA 7(a) is the dominant program for business acquisitions. Working capital, goodwill, and asset value can all be rolled into a single loan. The SBA 504 cannot finance goodwill or working capital -- making 7(a) the only SBA option for most acquisitions.
Working capital
Need cash for inventory, payroll, or operational expenses? SBA 7(a) is the only SBA program that covers working capital. The SBA 504 cannot be used for working capital under any circumstances.
Startup financing
SBA 7(a) explicitly allows startups. No minimum years in business. Lenders will require a strong business plan, projections, and often a higher down payment (20-30%), but the program door is open where conventional financing won't even look.
Mixed-use loans
When your financing need spans multiple uses -- part real estate, part equipment, part working capital -- SBA 7(a) can fund them all in one loan. The SBA 504 requires the use to be primarily fixed assets, making 7(a) the better fit for blended needs.
Limited collateral
If your collateral doesn't fully cover the loan amount, SBA 7(a) is far more accessible than conventional. SBA rules prohibit lenders from declining solely on collateral deficiency -- they must take available collateral and move forward if other underwriting factors are met.
Debt refinancing
SBA 7(a) can refinance existing business debt at better terms. The original debt must have been for eligible business purposes and the refinance must provide a "net tangible benefit" to the borrower (lower rate, lower payment, or both).
Our loan comparison calculator models all three simultaneously. Here is the decision framework our scoring engine uses -- and that experienced lenders apply.
SBA 7(a)
The SBA 7(a) is the Small Business Administration's flagship loan program -- the most flexible and widely used form of government-backed small business financing in the United States.
The SBA does not lend money directly. Instead, it guarantees a portion of the loan made by an approved commercial lender -- typically 75-85% of the loan amount. This guarantee reduces the lender's risk, allowing them to extend credit to businesses that might not qualify for a conventional bank loan on the same terms.
The guarantee is backed by the U.S. government, but the loan is originated, underwritten, and serviced by the participating lender. The SBA sets program rules -- maximum rates, maximum terms, eligible uses, and borrower requirements -- while lenders apply their own underwriting standards on top.
Key point
The SBA 7(a) is designed for businesses that are creditworthy but lack sufficient collateral or down payment to qualify for conventional financing. The government guarantee compensates for what conventional lenders would consider insufficient security.
The SBA 7(a) has several sub-programs. Our calculator models the Standard 7(a) -- the most common, which covers loans from $500,000 to $5,000,000 with the full SBA guarantee structure.
| Sub-program | Max loan | Max guarantee | Key feature |
|---|---|---|---|
| SBA 7(a) Standard | $5,000,000 | 75-85% | Full underwriting, all eligible uses |
| SBA Express | $500,000 | 50% | Faster approval (36 hrs); lender uses own docs |
| Export Express | $500,000 | 75% | For businesses that export or plan to export |
| SBA CAPLines | $5,000,000 | 75-85% | Revolving credit lines for working capital |
| Export Working Capital | $5,000,000 | 90% | Transaction-based working capital for exporters |
| International Trade | $5,000,000 | 90% | For businesses that compete with imports or export |
The SBA 7(a) has some of the broadest eligibility criteria of any SBA program -- including startups and businesses with limited collateral. Here is what lenders actually look for.
Minimum credit score
650 -- 680
Typical lender threshold. Scores below 650 face steep headwinds. 680+ opens most programs. 720+ gets best rates.
Business age
No minimum
SBA 7(a) is one of the few programs explicitly accessible to startups. Lenders may still require a business plan and projections for < 2-year-old businesses.
Down payment
10% typical
SBA requires "equity injection" -- often 10% of total project cost. Startups and special-use properties may require 20-30%. Seller notes can sometimes count.
Collateral
Required if available
SBA requires lenders to take available collateral -- but insufficient collateral alone will not disqualify you. Lenders must take what exists. This is unlike conventional loans where a coverage gap kills the deal.
DSCR minimum
1.25x
Debt service coverage ratio: annual EBITDA / annual debt service must be at least 1.25x at close. Global cash flow (personal + business) is considered.
Business type
For-profit only
Must be a for-profit U.S. business. Cannot be in certain ineligible industries: gambling, lending, pyramid schemes, government-owned entities, passive investment businesses.
Ineligible businesses
The SBA explicitly prohibits 7(a) loans to: financial businesses (banks, lenders, life insurance companies), passive investment businesses (real estate that is purely held for investment), government-owned entities, businesses deriving more than 1/3 of revenue from gambling, and businesses engaged in pyramid sales schemes. Commercial real estate with an operating business as the primary tenant is eligible.
Our calculator models a standard fully-amortizing SBA 7(a) loan and builds a complete financial picture including payment, total cost, DSCR, APR, and amortization schedule.
Monthly payment formula
P × (r × (1 + r)^n) / ((1 + r)^n - 1)
Where: P = loan principal | r = monthly rate (annual
rate / 12) | n = total months (term × 12)
This
is standard amortizing loan math. Every payment covers accrued
interest first; the remainder reduces principal.
DSCR (Debt Service Coverage Ratio)
Annual EBITDA / Annual Debt Service
Annual debt service = monthly payment × 12. DSCR of 1.25x means $1.25 of EBITDA for every $1.00 of annual payment. SBA requires 1.25x minimum. Lenders often stress-test at a higher rate.
APR (approximate, Newton-Raphson iteration)
Net proceeds = PMT × (1 - (1 + r)^-n) / r -- solve for r
APR is computed by finding the rate that makes the present value of all payments equal to the net loan proceeds after fees. The calculator runs ~50 Newton-Raphson iterations to converge. This is the true cost rate -- higher than the stated rate when fees are present.
Unlike a one-time upfront fee, the SBA also charges an annual guarantee fee on the outstanding guaranteed balance -- currently 0.55% per year. This is paid to the SBA by the lender and typically passed to the borrower. Our calculator includes this in the total cost of borrowing and factors it into the APR.
Total cost vs. monthly payment
The calculator shows both because they measure different things. Monthly payment determines whether the loan is serviceable from cash flow. Total cost (interest + all fees over life) shows the true price of the capital. A 10-year loan at 10.5% may have a lower monthly payment than a 7-year loan at 8.5% but a higher total cost -- our calculator shows both simultaneously.
| Field | What it is | Where to find it | Typical range |
|---|---|---|---|
| Loan amount needed | Total project cost minus your down payment. This is the amount you are borrowing -- not the total project cost. | Your business plan, purchase agreement, or contractor bid | $50K -- $5M |
| Down payment available | Your equity injection into the project. Can be cash, equity in existing assets, or sometimes a seller note. Shows as % of loan. | Your bank account / equity analysis | 10 -- 30% of total cost |
| Collateral value (FMV) | Fair market value of assets you can pledge as security. Real estate at current appraisal value. Equipment at forced liquidation value (often 50% of cost). | Recent appraisal, equipment schedules | 0 -- 200% of loan |
| Annual EBITDA / SDE | Earnings Before Interest, Taxes, Depreciation and Amortization -- or Seller's Discretionary Earnings for owner-operated businesses. This is your cash flow available to service debt. | Tax returns (Schedule C, 1120-S, 1120), add back D&A | $50K -- $2M+ |
| Personal credit score | The guarantor's FICO score. SBA 7(a) requires a personal guarantee from any owner with 20%+ ownership. The lowest score among guarantors often sets the threshold. | AnnualCreditReport.com, your bank, credit monitoring | 550 -- 850 |
| Years in business | How long the business has been operating. This affects lender risk assessment and required documentation, but SBA 7(a) has no statutory minimum. | Business formation date, tax filings | 0 -- 30 years |
| Loan purpose | What you will use the funds for. This affects the maximum term (real estate = 25 yr; equipment = 10 yr; working capital = 10 yr) and the fit score weighting. | Your business plan | 7 options |
| Real estate % of loan | What portion of the loan proceeds will purchase real property. Higher percentages favor longer terms and affect the SBA 504 comparison. | Purchase agreement or appraisal | 0 -- 100% |
| Field | What it is | SBA rules | Default |
|---|---|---|---|
| Interest rate (%) | The annual interest rate on the loan. SBA 7(a) rates are variable and float with Prime Rate. The spread (margin) is negotiated with the lender within SBA maximums. | Max: Prime + 2.75% (loans < 7 yr) / Prime + 3.75% (7+ yr) | 10.5% |
| Term (years) | The repayment period. Longer terms = lower monthly payment but higher total interest. SBA caps vary by purpose. | Max 10 yr (equipment, WC) / 25 yr (real estate) | 10 yr |
| Upfront guarantee fee ($) | One-time SBA fee on the guaranteed portion. Scales with loan size. Can be financed into the loan amount. Waived for loans under $150K and for veterans under $350K. | 0% (<$150K), 2% ($150K-$700K), 3% ($700K-$1M), 3.5% ($1M+) | $28,500 |
| Annual guarantee fee (%) | Ongoing annual fee charged on the outstanding guaranteed balance. Paid by lender, typically passed to borrower as part of the rate or as a separate fee. | 0.55% on guaranteed balance annually | 0.55% |
Tip: update the rate to your lender's quote
The default rate of 10.5% reflects current Prime + spread at the time this tool was built. Always update this to your lender's actual quoted rate before comparing programs. Request a rate lock quote in writing from at least two SBA-approved lenders.
The calculator produces seven sections of output. Here is what each number means and how to use it in a real lender conversation.
Section A -- Summary
Monthly payment
Principal + interest only. Does not include property taxes, insurance, or other escrow items a lender may require.
APR
True annualized cost including upfront fees amortized over the term. Use this to compare across programs.
DSCR
Your EBITDA divided by annual debt service. Green = 1.25x or above. Must be at least 1.25x to qualify.
Fit score
Weighted score (0-100) across 5 dimensions. Not a lender's decision -- a relative ranking vs. the other two programs.
Sections B-G
B: Payments
Detailed payment breakdown, annual debt service, rate type context, down payment requirements.
C: Total cost
Interest, fees, and ongoing guarantee fee broken out. "Interest per $1 borrowed" for cross-term comparison.
D: Amortization
Year-by-year: annual interest paid, principal paid, ending balance, cumulative interest, % remaining.
E-G: Score, Criteria, Recommendation
Fit score dimensions with bars and weights, 19-row criteria table comparing all three programs, scored recommendation with narrative.
Debt Service Coverage Ratio is the single most important underwriting metric for any SBA 7(a) loan. If your DSCR does not meet the minimum, the loan will not be approved regardless of credit score or collateral.
DSCR calculation
DSCR = Annual EBITDA / (Monthly Payment × 12)
Example: $300,000 EBITDA / ($22,500 monthly payment × 12)
= $300,000 / $270,000 = 1.11x -- below the 1.25x minimum.
To
fix: increase EBITDA (via add-backs or projections), reduce loan
amount, extend term, or reduce the interest rate.
| DSCR range | What it signals | Likely outcome |
|---|---|---|
| 1.50x and above | Strong cash flow cushion. Debt service is well-covered even at higher rates or lower revenue. | Strong approval likelihood. May accelerate decisioning. |
| 1.25x -- 1.49x | Meets SBA minimum. Lender has standard coverage. Still approved with good credit and collateral. | Standard underwriting. Normal processing timeline. |
| 1.10x -- 1.24x | Below SBA minimum. Lender may require additional collateral, personal assets pledge, or co-borrower to bridge the gap. | Possible with compensating factors. Expect longer process. |
| Below 1.10x | Insufficient cash flow at current payment. Loan is not serviceable. Must restructure terms, reduce amount, or improve income documentation. | Decline likely without significant restructuring. |
Global cash flow
SBA lenders calculate "global cash flow" -- they add your personal income from all sources to the business EBITDA and divide by all personal and business debt obligations. If you have W-2 income, rental income, or other businesses, these improve your global DSCR. The calculator uses business EBITDA only; your lender will consider your full financial picture.
SBA 7(a) loans have a more complex fee structure than conventional loans. Understanding all three fee types prevents surprises at closing.
| Fee | Who charges it | Rate | When paid | Financeable? |
|---|---|---|---|---|
| SBA guarantee fee | SBA (via lender) | 0 -- 3.75% of guaranteed portion | At closing | Yes -- can be rolled into loan |
| Annual SBA fee | SBA (via lender) | 0.55% of outstanding guaranteed balance | Annually, life of loan | No -- paid each year |
| Lender origination | Bank / lender | 0 -- 3% (lender discretion) | At closing | Often financeable |
| Packaging fee | SBA loan packager | $2,500 -- $5,000 flat | At closing | Varies |
| Appraisal | Appraiser | $2,500 -- $10,000+ | At application or closing | No -- paid out of pocket |
| Environmental | Environmental firm | $500 -- $3,500+ | At application or closing | No -- paid out of pocket |
Guarantee fee scale
The SBA guarantee fee is charged on the guaranteed portion (not the full loan amount): 0% for loans ≤ $150K, 2% for $150K-$700K, 3% for $700K-$1M, and 3.5% for the first $1M of loans above $1M, plus 3.75% on the portion above $1M. For a $1,500,000 loan at 85% guarantee, the guaranteed portion is $1,275,000 -- resulting in a fee of approximately $31,875 (3.5% on first $850K + 3.75% on next $425K). Veterans are exempt on loans up to $350K.
SBA 7(a) rates are variable and tied to the Wall Street Journal Prime Rate. The SBA sets maximum spreads (margins) that lenders can add to Prime.
| Loan term | Max SBA spread | Rate structure | Current rate (est.) |
|---|---|---|---|
| Under 7 years | Prime + 2.75% | Floating; resets when Prime changes | 11.25% (Prime 8.5% + 2.75%) |
| 7 years and over | Prime + 3.75% | Floating; resets when Prime changes | 12.25% (Prime 8.5% + 3.75%) |
| Under $50K | Prime + 6.5% | Smaller loans carry higher spread | 15.0% |
Some lenders offer fixed-rate SBA 7(a) loans, typically for shorter terms (5-7 years). These carry a higher initial rate than the variable equivalent but protect against rate increases. Fixed-rate 7(a) loans are less common and are underwritten differently.
Rate risk on variable loans
If you borrow at Prime + 2.75% and Prime increases by 200 basis points, your rate increases by 200 basis points. On a $750,000 loan, a 2% rate increase adds approximately $1,000/month to your payment. Our calculator lets you model this: simply enter the stressed rate in the interest rate field to see the impact on your DSCR and monthly payment.
Business acquisition
SBA 7(a) is the dominant program for business acquisitions. Working capital, goodwill, and asset value can all be rolled into a single loan. The SBA 504 cannot finance goodwill or working capital -- making 7(a) the only SBA option for most acquisitions.
Working capital
Need cash for inventory, payroll, or operational expenses? SBA 7(a) is the only SBA program that covers working capital. The SBA 504 cannot be used for working capital under any circumstances.
Startup financing
SBA 7(a) explicitly allows startups. No minimum years in business. Lenders will require a strong business plan, projections, and often a higher down payment (20-30%), but the program door is open where conventional financing won't even look.
Mixed-use loans
When your financing need spans multiple uses -- part real estate, part equipment, part working capital -- SBA 7(a) can fund them all in one loan. The SBA 504 requires the use to be primarily fixed assets, making 7(a) the better fit for blended needs.
Limited collateral
If your collateral doesn't fully cover the loan amount, SBA 7(a) is far more accessible than conventional. SBA rules prohibit lenders from declining solely on collateral deficiency -- they must take available collateral and move forward if other underwriting factors are met.
Debt refinancing
SBA 7(a) can refinance existing business debt at better terms. The original debt must have been for eligible business purposes and the refinance must provide a "net tangible benefit" to the borrower (lower rate, lower payment, or both).
Our loan comparison calculator models all three simultaneously. Here is the decision framework our scoring engine uses -- and that experienced lenders apply.
SBA 7(a)
SBA 504
Conventional
The key decision point: if your loan purpose includes working capital, goodwill, or any non-fixed-asset component, SBA 7(a) is your only SBA option. If you are buying or building commercial real estate or heavy equipment with no working capital need, the SBA 504 often provides a lower effective rate because of the fixed below-market CDC debenture. Use the comparison calculator to run both scenarios with your specific numbers.
Understanding the process helps you use the calculator effectively -- you know what documentation is needed and which numbers to validate before you sit down with a lender.
Pre-qualify with the calculator
Run your numbers here first. Confirm your DSCR is at 1.25x or above, your credit score is 650+, and your down payment reaches at least 10% of total project cost. Identify your preferred term and loan amount before approaching lenders.
Identify SBA-approved lenders
Use the SBA's Lender Match tool (sba.gov/lendermatch) or contact SBA Preferred Lenders directly. Preferred Lenders (PLPs) can make SBA decisions in-house without SBA review -- much faster. Request quotes from at least 2-3 lenders.
Gather documentation
Typical SBA 7(a) package: 3 years of business tax returns, 3 years of personal tax returns, YTD P&L and balance sheet, personal financial statement (SBA Form 413), business debt schedule, purchase agreement or use-of-funds summary, business plan (required for startups). Update the calculator with your actual EBITDA from the returns.
Submit application
Lender completes underwriting (typically 30-60 days for Standard 7(a); 36 hours for SBA Express). PLP lenders can approve internally. Non-PLP lenders submit to SBA for review, adding 5-15 business days.
Commitment letter and closing
Once approved, you receive a conditional commitment letter outlining terms. Satisfy conditions (appraisal, environmental, legal entity docs). Close typically within 30-45 days of commitment. Total timeline: 45-90 days from application to funding.
Can I use the SBA 7(a) to buy an existing business?
Yes -- business acquisition is one of the most common uses of the SBA 7(a). The loan can cover the purchase price including goodwill, which conventional lenders typically will not finance. You will need to demonstrate that the business cash flow (EBITDA) covers the new debt service at 1.25x, that the purchase price is supported by a business valuation, and that you have at least 10% down payment from your own funds. The seller can carry back up to 10% as a seller note on standby for 2 years.
What is the SBA guarantee percentage and why does it matter?
For loans over $150K, the SBA guarantees 75% of the loan amount (85% for loans under $150K, and up to 90% for Export Working Capital). This means if you default, the SBA pays the lender 75% of the outstanding balance. The guarantee fee is charged on this guaranteed portion -- not the full loan -- which is why knowing the exact fee requires knowing both the loan amount and the guarantee percentage. The guarantee is what enables lenders to approve borrowers who wouldn't qualify conventionally.
Is the SBA 7(a) interest rate fixed or variable?
Standard SBA 7(a) rates are variable and float with the Wall Street Journal Prime Rate. The spread (the amount added to Prime) is negotiated with the lender within SBA maximums. Some lenders offer fixed-rate 7(a) products for shorter terms (typically 5-7 years), but these are less common and carry a higher initial rate. Our calculator defaults to a variable rate -- if you have a fixed-rate quote, simply enter that fixed rate and it will compute correctly.
Does the calculator include the SBA guarantee fee?
Yes. The upfront guarantee fee is treated as an upfront cost that reduces your net loan proceeds, which is then factored into the APR calculation. The ongoing annual guarantee fee (0.55%) is also included in the total cost of borrowing figure. Both are shown separately in Section C (Total Cost) and in the Summary table. You can adjust these to match your specific fee quote from the lender.
My DSCR is below 1.25x. What can I do?
Four levers: (1) Reduce the loan amount -- less principal means lower payment. (2) Extend the term -- longer amortization reduces the monthly payment. The calculator lets you drag the term slider to see the DSCR impact instantly. (3) Document higher EBITDA -- if your tax returns understate actual cash flow due to add-backs (owner perks, non-recurring expenses, excess depreciation), a quality of earnings analysis may increase the lender's view of EBITDA. (4) Add a co-borrower -- a spouse or business partner with income improves global cash flow.
Can I pay off an SBA 7(a) loan early?
The SBA imposes a prepayment penalty only on loans with terms of 15 years or more, during the first 3 years: 5% in year 1, 3% in year 2, 1% in year 3. For loans under 15 years (which covers the vast majority of SBA 7(a) loans including the 10-year standard term), there is no SBA prepayment penalty. Note that your lender may have their own prepayment terms in addition to the SBA's rules -- review the commitment letter carefully.
What is the difference between the interest rate and APR in the calculator?
The interest rate is the stated annual rate used to compute your monthly payment. The APR (Annual Percentage Rate) is higher -- it incorporates the upfront guarantee fee spread across the loan term. For example: a $750,000 loan at 10.5% with a $28,500 upfront fee has a stated rate of 10.5% but an APR of approximately 10.9%. Use the APR when comparing across programs -- it is the true apples-to-apples cost measure.