The SBA 7(a) loan, explained for people buying a business
Short answer
A 7(a) loan is a loan from a private lender that SBA partly guarantees: up to $5 million, with SBA covering 85% of loans up to $150,000 and 75% above that (50% for SBA Express). Rates and fees are capped by SBA. Used to buy a business, a 7(a) loan follows the change-of-ownership rules in Appendix 15 of SOP 50 10 8.1: 10% equity, an independent valuation, a QoE at $3 million and up, and a 10-year maximum term for the business.
The 7(a) program is SBA's main lending program and the one most small business buyers end up using. It's also widely misunderstood: people talk about "getting an SBA loan" as if SBA were the bank. It isn't. Here's how the program actually works, what the numbers are as of October 2026, and what changes when the loan is for buying a business.
How a 7(a) loan works
A lender approved to make 7(a) loans underwrites your application, either under its own delegated authority or by sending it to SBA for a decision. If approved, SBA guarantees a percentage of the loan and the lender pays SBA an upfront guaranty fee (usually passed on to you) and an annual service fee. The lender services the loan. If it goes bad, the lender liquidates collateral and can ask SBA to honor the guaranty, as long as it followed SBA's rules. That last condition is why lenders follow the SOP so closely: a lender that ignores a rule risks losing the guaranty.
The numbers, as of October 2026
| Item | Standard 7(a) | 7(a) Small | SBA Express |
|---|---|---|---|
| Maximum loan | $5,000,000 | $350,000 | $500,000 |
| SBA guaranty | 85% up to $150,000, 75% above | 85% up to $150,000, 75% above | 50% |
| Max SBA exposure per business and affiliates | $3,750,000 across all SBA loans | ||
| Max variable rate | Prime + 3% above $350,000 | Prime + 4.5% to + 6.5% by size | Prime + 3% from $350,001 to $500,000; higher caps below |
| Who decides | SBA or lender with PLP authority | SBA or delegated lender | Lender under its own Express authority |
Variable rates use Prime or SBA's optional peg rate as the base. SBA publishes fixed-rate maximums on its website, and the fee chart below is the maximum allowed by regulation; SBA can announce temporary changes for a fiscal year, so ask your lender what applies when your loan is approved.
| Loan size (term over 12 months) | Maximum upfront guaranty fee |
|---|---|
| $150,000 or less | 2% of the guaranteed portion |
| $150,001 to $700,000 | 3% of the guaranteed portion |
| $700,001 to $5,000,000 | 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion above $1,000,000 |
SBA's own example: a $5,000,000 loan with a 75% guaranty has a $3,750,000 guaranteed portion, so the maximum fee is 3.5% of $1,000,000 ($35,000) plus 3.75% of $2,750,000 ($103,125), or $138,125. The fee can be financed in the loan.
Delivery methods
"7(a)" is a family of loan types. They share the program rules but differ in size, guaranty and paperwork. For buying a business, three matter:
- Standard 7(a): the default for acquisitions above $350,000, up to $5 million.
- 7(a) Small: loans of $350,000 or less. Change-of-ownership rules still apply.
- SBA Express: up to $500,000, 50% guaranty, made by lenders with Express authority using their own forms. Also bound by Appendix 15 when used for an acquisition.
CAPLines, the Export Working Capital Program and revolving lines can't be used to fund a change of ownership, though a line of credit can sit alongside an acquisition loan. More in types of 7(a) loans and SBA Express vs 7(a).
What changes when the 7(a) loan buys a business
Most 7(a) rules are general. Acquisitions have their own set in Appendix 15 of SOP 50 10 8.1, and if anything elsewhere in the SOP conflicts, Appendix 15 wins. The main differences:
Equity
At least 10% of total project cost. For a first-time purchase it can't be reduced. Seller standby debt can be up to half.
Valuation
An independent valuation by a credentialed Qualified Source, ordered by the lender, above a $350,000 Business Purchase Price. Debt is capped at the value.
QoE
A Quality of Earnings report with a proof of cash for Initial Acquisitions and Business Expansions at $3 million and up.
Cash flow
Historical DSC of 1.25x (1.15x for Business Expansions). Projections can't carry the test.
Term
Business portion amortized over no more than 10 years, no balloon. Real estate can stretch to 25 years.
Seller
No earnouts. The seller exits a first-time purchase, with a consulting role of up to 24 months.
All change-of-ownership loans go through full Standard 7(a)-style underwriting under Appendix 15, including those made as 7(a) Small or Express. The two small-loan concessions are an optional lender-performed valuation at a Business Purchase Price of $350,000 or less, and a narrower collateral search. See acquisition requirements.
Eligibility in brief
- For-profit business operating in the US, small under SBA size standards (combined with the business being acquired).
- All direct and indirect owners and required guarantors are U.S. citizens or U.S. nationals with a principal residence in the US.
- Not an ineligible type, such as passive real estate investment, lending, speculation or businesses engaged in illegal activity.
- Credit isn't available elsewhere on reasonable terms without the guaranty.
- Owners of 20% or more give an unlimited personal guaranty.
Full detail in 7(a) eligibility and 7(a) requirements.
Uses of proceeds for a buyer
How long a 7(a) acquisition loan lasts
For the business itself (goodwill, equipment, working capital) the amortization is capped at 10 years. If the deal includes the building the business operates from, the lender can make two loans, or blend the term by the weighted average of the uses, with the real estate share going up to 25 years. A special-purpose property exemption allows up to 25 years where at least 85% of project costs are real estate. See acquisition loan terms.
Where the rules come from
The 7(a) program is created by section 7(a) of the Small Business Act. SBA's regulations are in 13 CFR Part 120. The detailed operating rules, which lenders work from day to day, are in SOP 50 10, currently version 8.1 with technical updates, effective October 1, 2026, plus policy and procedural notices. When a summary you read online conflicts with the SOP, the SOP is what your lender follows. See how to read SBA loan rules.
Checked against SBA sources on October 25, 2026.
Types of 7(a) loans
The 7(a) program has several delivery methods: Standard 7(a) (up to $5 million), 7(a) Small (up to $350,000), SBA Express (up to $500,000), CAPLines lines of credit, export loans, and MARC loans for manufacturers. Only term loans can fund a business purchase. SOP 50 10 8.1 says change of ownership isn't an eligible use for CAPLines, the Export Working Capital Program or revolving facilities.
SBA uses "delivery method" for the different ways a 7(a) loan can be made. They share the program's rules but differ on size, guaranty and purpose. Here's the list, filtered for a buyer.
| Type | Size | Guaranty | Can fund a business purchase? |
|---|---|---|---|
| Standard 7(a) | Up to $5,000,000 | 75% (85% at $150K or less) | Yes, the usual choice |
| 7(a) Small | Up to $350,000 | 85% / 75% | Yes |
| SBA Express | Up to $500,000 | 50% | Yes (term loan) |
| CAPLines | Lines of credit | Program-specific | No |
| Export Working Capital Program | Export lines | Program-specific | No |
| Export Express, International Trade | Export-related | Program-specific | Only within their export purposes |
| 7(a) MARC (manufacturers' revolving credit) | Revolving | Program-specific | No, but can sit alongside one |
Which to ask for
Lenders usually choose the delivery method based on size and their own authority. As a buyer:
- Total need over $500,000: Standard 7(a).
- Under $350,000: 7(a) Small or SBA Express; both allow a lender-prepared valuation when the Business Purchase Price is $350,000 or less and you're not closely related to the seller.
- Need a working capital line too: ask for the term loan plus a line (SBA Express line, CAPLines or conventional), keeping in mind the 20% to 50% day-one rule if the line takes first lien on receivables and inventory. See SBA Express lines.
Whatever the type, Appendix 15 applies to the acquisition: 10% equity, DSC, valuation, seller exit. See the 7(a) loan explained.
Programs that have ended, such as Patriot Express and Community Express, still appear in search results; their outstanding balances count toward the SBA Express aggregate limit, but they aren't available for new loans in the current SOP.
Common questions
What is the maximum SBA 7(a) loan amount?
$5 million for a Standard 7(a) loan. SBA's guaranteed share to any one business, including affiliates, can't exceed $3.75 million. SBA Express is capped at $500,000 and 7(a) Small loans at $350,000.
Does SBA lend the money directly?
No. Banks, credit unions and licensed non-bank lenders make 7(a) loans; SBA guarantees part of each loan and sets the program rules.
What can a 7(a) loan be used for?
Buying a business, real estate, equipment, working capital and refinancing eligible debt, among other uses. It can't be used for passive real estate investment, lending businesses or other ineligible purposes.
What interest rate does a 7(a) loan have?
The lender sets it within SBA's caps. For variable-rate loans over $350,000, the maximum is Prime (or SBA's optional peg rate) plus 3%. Smaller loans have higher caps, and SBA publishes fixed-rate maximums separately.
Is a 7(a) loan the same as an SBA Express loan?
SBA Express is one delivery method within the 7(a) program: loans up to $500,000 with a 50% guaranty, made under the lender's own procedures. Change-of-ownership rules still apply when Express is used to buy a business.
Related guides
Sources
This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.