7(A) LowDoc Loan Program

Agency: Small Business Administration

Program: 7(A) LowDoc Loan Program

Program Description: The LowDoc Program was designed to increase the availability of loans under $100,000 to the small business community and streamline and expedited the SBA loan review process. It offers a simple, one-page application form and rapid turnaround on loans of up to $100,000. Completed applications are processed quickly by the SBA upon receipt from the lender, usually within two or three days. Consequently, the loan decision process relies heavily upon the strength of the principals’ character and credit history. Term, interest rates, and uses are the same as for any 7(a) loan.

Proceeds of an SBA loan cannot be used: to finance floor plan needs; to purchase real estate where the participant has issued a forward commitment to the builder/developer, or where the real estate will be held primarily for investment purposes; to make payment to owners or pay delinquent withholding taxes; to pay existing debt unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of imprudent management.

Eligibility: Most small businesses are eligible for SBA loans, some types of businesses are ineligible and a case-by-case determination must be made by the Agency. Eligibility is generally determined by four factors: type of business, size of business, use of loan funds, and special circumstances. The vast majority of businesses are eligible for financial assistance from the SBA. However, applicant businesses must operate for profit; be engaged in, or propose to do business in the United States or its possessions; have reasonable owner equity to invest; and, use all financial resources first including personal assets. It should be noted that some businesses are ineligible for financial assistance.

Funding Information: The maximum amount for a LowDoc loan is $100,000. SBA may guaranty up to 80% of LowDoc loans. Holders of at least 20% ownership in the business are generally required to guaranty the loan. Although inadequate collateral will not be the sole reason for denial of a loan request, the nature and value of that collateral does factor into the credit decision. Maximum loan maturities are 25 years for real estate and equipment and generally 7 years for working capital.

Interest rates are negotiated between the borrower and the lender but are subject to SBA maximums, which are pegged to the Prime Rate. Interest rates may be fixed or variable. Fixed rate loans must not exceed Prime plus 2.25% if the maturity is less than seven years, and Prime plus 2.75% if the maturity is seven years or more. For loans of less that $25,000, the maximum interest rate must not exceed Prime plus 4.25% and 4.75% respectively; for loans between $25,000 and $50,000, maximum rates must not exceed 3.25% and 3.75%, respectively. Variable rate loans may be pegged to either the lowest prime rate or the SBA optional peg rate. The optional peg rate is a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan.

Timelines: Applications are accepted year round.

Contact: Int www.sba.gov

Sacramento (916)498-6410 Fresno (209)487-5791

Glendale (818)552-3210 San Diego (619)557-7250

Santa Anna (714)550-7420 San Francisco (415)744-6820