SBA guaranteed loans under the 7(a) Loan Guaranty Program are the most popular small business loans available from any federal agency. The name “7(a)” comes from section 7(a) of the Small Business Act, which authorizes the SBA to provide guarantees for small business loans funded by approved lenders. SBA 7(a) loans are provided by Arkansas Capital Corporation who is authorized to underwrite, close, fund, service, and liquidate these loans by the SBA. This allows us to make loans to small businesses that might not otherwise qualify for financing.
All SBA 7(a) loan applicants must meet the product’s eligibility requirements, which are designed to be as broad as possible. Businesses must meet SBA size standards, must be “for profit”, must be without internal resources to provide the financing, and must be able to demonstrate repayment ability.

Details of an SBA7(a) Guaranteed Loan

SBA guaranteed loans can be used to purchase or improve owner-occupied commercial real estate, leasehold improvements, machinery and equipment, fixtures and furniture, inventory, and other business assets; to provide working capital; to refinance certain debt; to purchase a business; and to pay loan closing costs.

SBA guaranteed loans funded by Arkansas Capital Corporation range from as small as $100,000 to a maximum of $5,000,000. Loans in excess of $5,000,000 are not eligible for an SBA guarantee.

SBA guaranteed loans funded by Arkansas Capital Corporation carry floating rates, up to 2.75% over the Wall Street Journal Prime rate, adjusting every calendar quarter.

Up to 25 years; SBA loans are fully amortizing over the life of the loan without balloon or demand features. The term offered is based on the use of the loan proceeds. Terms for asset categories are as follows: • Real Estate — up to 25 years • Working Capital — 5 to 10 years, depending on the borrower’s ability to repay • Machinery & Equipment — based on the useful life of the asset

Prepayment penalties will apply for SBA 7(a) Loans with maturities of 15 years or more, as follows: When in any one of the first three years from the date of initial disbursement the Borrower voluntarily prepays more than 25% of the outstanding principal balance of the loan, the Borrower must pay to Lender on behalf of SBA a prepayment fee for that year as follows: 1. during the first year after the date of initial disbursement, 5% of the total prepayment amount; 2. during the second year after the date initial disbursement, 3% of the total prepayment amount; and 3. during the third year after the date of initial disbursement, 1% of the total prepayment amount.

An SBA Guaranteed Loan requires a one-time fee (see section below) based on the dollar amount being guaranteed. SBA application packaging fee of $1,250. Consumer and business credit reports, income tax verification and initial environmental screening — up to $650.00. Loan fees may be financed in the loan. Your Good Faith Deposit will be used to offset loan underwriting, as well as packaging and closing expenses. However, appraisals and further environmental expenses are not included in your Good Faith Deposit and are collected separately prior to the engagement of any such professional services.

Loan maturity of 12 months or less = .25% of guaranteed portion Loan maturities over 12 months (depending upon gross loan amount, as follows) 

Gross Loan $150,000 or less 2.0% of guaranteed portion $150,001 – $700,000 3.0% of guaranteed portion $700,001 – $5,000,000 3.5% of guaranteed portion plus 0.25% for the guaranteed portion over $1,000,000

Loans must be collateralized to the maximum extent possible up to the loan amount. If business assets do not fully secure the loan and personal assets are available, they must be pledged as additional collateral to secure the debt.

All principals who own 20% or more of the business are required to provide a full guarantee. Principals or key managers owning less than 20% may be required to provide a guarantee on a case-by-case basis. When necessary to secure a collateral position, ACC Lending will require the guaranty of a non-owner spouse to the extent of the spouse’s interest in the collateral. The guarantee of affiliated companies may also be required based on the percentage of ownership of the affiliate and the borrower’s relationship with the affiliate.

A minimum historical or projected debt service coverage ratio of 1.2 times is required. 

Loans can generally be made to all for-profit small businesses except those that do not meet SBA 7(a) eligibility requirements. These are primarily small businesses engaged in lending, loan packaging, investments, pawn shops, passive real estate investments, life insurance companies, small businesses located in a foreign country or owned by illegal aliens, pyramid plan sales, gambling, businesses which restrict patronage or promote a religion, cooperatives, non-profits, or individuals of poor character or on probation or parole.

Other Considerations & Requirements



Evidence must be provided by the applicant prior to any loan closing and disbursement.


Standby creditor must subordinate any lien rights in collateral securing a loan to the lender’s rights in the collateral and agree to take no action against applicant or any collateral securing the Standby Debt without lender’s consent.


Required for all Real Estate purchased or used as collateral.


Required to substantiate the value of any used machinery and/or equipment.


Required for all Real Estate purchased or used as collateral.


A late charge (not to exceed $100) in the amount of five percent (5%) of the amount of any payment which is not made within ten (10) days of the date the payment is due will be collected from the Borrower.


Arkansas Capital must document that the borrower used the loan proceeds for the approved purposes.


Property insurance (fire and theft, extended coverage and liability) will be required. All personal and real property shall be insured for replacement cost. Insurance coverage for improvements to real property must contain a Mortgagee Clause in favor of lender. Insurance coverage for personal property must contain a Lender’s Loss Payable Clause in favor of lender. Additionally, the policy must provide written notice at least 10 days prior of policy cancellation.


The key principals of the operating company may be required to provide an assignment of life insurance in the amount of the loan.


Will be required if the property is located within a flood area.


Will be required in amounts meeting state law requirements.


Arkansas Capital must verify the applicant’s last 3 years (unless applicant is a start-up business) of tax returns submitted to IRS via IRS Form 4506-T.


Lease(s), including options, on all business premises where collateral is located should be for as least as long as the term of the loan.


A perfected assignment of all rents paid under a lease between an Eligible Passive Concern (Real Estate Holding Company) and the applicant Operating Company is required.


Applicant must provide lender access to any leased premises and facilities where collateral is located with an executed Landlord’s Waiver.


Evidence of compliance with the “National Earthquake Hazards Reduction Program Recommended Provisions for the Development of Seismic Regulations for New Buildings” (NEHRP) or a building code that has substantially equivalent provisions is required.


Construction or Installation of Machinery & Equipment: Except under special circumstances, will not be permitted.


Applicant must show ability to pay cost overruns, if any.


Applicant must provide lien waivers or releases from all materialmen, contractors, and subcontractors involved in any construction.


• Existing Real Estate Improvements occupy at least 51% of the property.
• New Construction occupy at least 60% of the property.


All franchised operations not listed on the Franchise Registry must pass a legal review of the applicant’s Franchise Agreement and Franchisor’s Disclosure Statement.


Certification from applicant that any required child support is no more than 60 days delinquent.


Applicant must be current on all federal, state, and local taxes, including but not limited to income taxes, payroll taxes, real estate taxes, and sales taxes.


A Good Faith Deposit (see below schedule) shall be required and applied to Six Bridges Capital Corporation’s processing fee and other costs associated with credit investigation and underwriting. If approval is not obtained, the Good Faith Deposit shall be refunded (less the cost of credit verification, environmental screening, IRS filing verification and any other out of pocket expenses incurred by 6BCC).
• $2,500 SBA 504 Debentures of $500,000 and less
• $3,500 SBA 504 Debentures of $500,001 to $999,000
• $5,000 SBA 504 Debentures of $1,000,000 and over


Neither the Borrower nor Operating Company has been determined by the Secretary of Homeland Security or the Attorney General to have engaged in a pattern or practice of hiring an alien, recruiting an alien or referring an alien for a fee for employment in the United States, knowing that the person is an unauthorized alien.

SBA 7(a) Prepayment Guidelines

Prepayment fees on SBA 7(a) loans only apply in the first 3 years of a long term loan (loans 15 years or longer) and are not retained by the lender but are remitted to SBA directly to help defray costs in the loan product. The prepayment fee is enforced if the prepayment amount exceeds 25% of the outstanding balance AND the prepayment is made within the first three years after the date of first disbursement (not approval) of the loan proceeds.

1ST YEAR, 5% of the amount of prepayment 2ND YEAR, 3% of the amount of prepayment 3RD YEAR, 1% of the amount of prepayment


EXAMPLE: Loan balance at time of first prepayment = $100,000

  • 1st prepayment made in 2nd year = $10,000 (no penalty)
  • 2nd prepayment made in 2nd year = $17,000 (now penalty is triggered)
  • 25% of $100,000 = $25,000 (trigger)
  • 2nd prepayment, added to first prepayment = $27,000
  • Prepayment amount = $27,000 x 3% = $810

Self-Directed Retirement Funds

Unconventional IRA Structure Provides Little Known Business Funding Options 

Although thousands have discovered this golden opportunity, some of the savviest lenders and borrowers are still unaware of this remarkable funding option: Individuals can utilize their IRA monies before retirement age to purchase a business or leverage a loan without incurring early distribution penalties.

Thanks to the government’s 1974 ERISA laws, borrowers can self-direct up to 100% of their retirement funds into investments that include the purchase of a business or franchise. This option is ideal for those who want to improve their odds of securing leverage by providing a substantial down payment on SBA, conventional, commercial or other loans. While IRA, 401(k), Keogh, SEP, and other retirement funds could be used in this way for the past three decades, it’s only been in recent years that business and franchise buyers have begun seizing this opportunity.

By using a structure similar to that of a self-directed IRA, a borrower can help finance their entrepreneurial endeavor. The benefits and risks of tapping IRA funds to help finance a business or franchise purchase can be many and we recommend that you speak to a professional in this area along with your accountant and attorney.