A New Era of NAC: SBA 7(a) Loans
North Avenue Capital, a leader in innovative financing solutions for rural America, made a significant addition to its lending products this summer and now offers SBA 7(a) loans nationwide. By expanding its suite of services, NAC is doubling down on its government-guaranteed lending expertise while broadening its service to small businesses beyond rural America and extending its reach into urban and suburban communities.
For the past decade, North Avenue Capital has partnered with the USDA to support rural communities with strategic financial support through USDA OneRD loans. After closing nearly $1 billion in small business loans for rural organizations, NAC is extending its expertise to SBA 7(a) loans in amounts of $500,000 to $5 million. This move reflects North Avenue Capital’s dedication to enhancing opportunities for small businesses across the country.
For small businesses, securing financing can be crucial for growth and success, regardless of your location. One popular option for small businesses is the SBA 7(a) Loan Program. Let’s explore this program and how it can benefit your business.
What is the SBA 7(a) Loan Program?
The 7(a) loan program is the Small Business Administration’s primary program for providing financial assistance to small businesses with loans up to $5 million. These loans are not directly issued by the SBA, but rather by preferred lenders (mostly banks) and guaranteed by the SBA. While the SBA program may be new to North Avenue Capital, it’s not to Veritex Community Bank, NAC’s parent company. Veritex is an SBA-preferred lender and has closed more than three-quarters of a billion dollars in SBA loans as of 2024.
Key Features of North Avenue Capital’s SBA 7(a) Loans:
- Loan amounts: $500,000 to $5 million
- Flexible use of funds
- Longer repayment terms than conventional loans
- Lower down payments
- No collateral is required for some loans
What can an SBA 7(a) Loan be used for?
SBA 7(a) Loans can be used for various business purposes including working capital, equipment and real estate purchases, business acquisition, and refinancing existing debt. Let’s explore 10 eligible uses of funds in a little more detail to give you a better idea of how your business could utilize a 7(a) loan from NAC.
- Business acquisition: Buying an existing business or franchise.
- Business expansion: Funding growth initiatives like opening new locations.
- Real estate: Purchasing land or building for business use, or renovating existing property.
- Debt refinancing: Consolidating existing business debts under more favorable terms.
- Equipment purchases: Buying machinery, vehicles, or other equipment needed for business operations.
- Furniture and fixtures: Purchasing items needed to outfit a business space.
- Inventory: Stocking up on products for sale or raw materials for manufacturing.
- Marketing and advertising: Promoting the business to attract customers.
- Working capital: To fund day-to-day operations, payroll, or inventory purchases.
- Seasonal financing: Covering cash flow gaps during slow periods.
This is just an example of how business owners can use SBA 7(a) Loan proceeds. However, 7(a) loans cannot be used for certain purposes, such as investing in rental real estate, paying off, or financing nonprofit activities.
What are the eligibility requirements for an SBA 7(a) Loan?
The SBA 7(a) Loan Program covers a wide variety of business industries, but there are a few key eligibility requirements. Loans must be for a for-profit business operating in the United States. Unlike USDA Rural Development Program Loans, 7(a) loans have no geographical restrictions, so long as the company is in the U.S. Qualifying businesses must meet the SBA size standards to be classified as a “small business.” The SBA size requirements consider market share, business income, number of employees, and other factors. Creditworthy borrowers must demonstrate a reasonable ability to repay the loan and have exhausted other financing options.
How do NAC and Veritex work together?
North Avenue Capital is excited to launch into the SBA 7(a) lending space thanks to its partnership with its parent company Veritex Community Bank. Together, Veritex and NAC are poised to surpass $1 billion in SBA lending soon.
In the fall of 2021, North Avenue Capital was acquired by Veritex Community Bank. This strategic partnership has been a story of mutual growth and success, opening up new opportunities for us to expand our reach and enhance our services. Veritex, known for its strong community ties and robust financial expertise, shares our vision of empowering businesses and driving economic growth.
Our combined resources and expertise enable us to offer a wider range of financial products and services, tailored to meet the diverse needs of our clients. But what does this mean for SBA 7(a) lending at NAC? Well, the experienced government-guaranteed lending experts at NAC originate the loan and then collaborate closely with Veritex. Veritex’s credit team reviews the potential loan before issuing a term sheet. To date, Veritex has closed nearly $1 billion in SBA 7(a) loans.
How quickly can I get an SBA 7(a) Loan?
Historically, Veritex strives to close SBA 7(a) loans quickly. Together, NAC and Veritex can move just as fast as a borrower can get the required documents and financial statements to a loan specialist. This means the business owner sets the pace.
What are the benefits of an SBA 7(a) Loan from NAC?
- Lower interest rates compared to other commercial loan options.
- Longer repayment terms (up to 10 years for working capital and 25 years for real estate is involved).
- Low down payments.
- Flexible use of funds.
- Refinance a USDA loan.
- Easier qualification as the SBA guarantee makes lenders more willing to approve loans for businesses that might not qualify for conventional funding.
- The SBA offers additional resources and support to borrowers, including business counseling and education.
- No balloon payments.
- Lower fees compared to other conventional commercial loans.
The SBA 7(a) loan program can be an excellent financing option for eligible small businesses. By offering more favorable terms than many conventional loans, it aims to support small business growth and success.
North Avenue Capital remains steadfast in its commitment to fostering economic growth and supporting small businesses. Powered by Veritex Bank’s SBA 7(a) experience, the company is positioned to make a significant impact on a broader scale. For more information about NAC’s SBA 7(a) Loan Program, click here.
