Commonly Used Terms Related to the 7a SBA Loan

There may be a number of terms that you are unfamiliar with in regards to the 7a SBA loan. This article intends to focus on the terms that you will come across as your progress through your acquisition of Small Business Administration Financing:

Annual Percentage Rate (APR) – This is the annualized interest rate that will be applied to the principal balance of the 7a SBA loan that you undertake from a lending bank.

Balance Sheet – This is a measure of assets versus liabilities and other debts.

Business Plan – This is a document that showcases your business operations, you intent regarding a business line of credit or loan, and the anticipated financial statements for your business over the next three to five years.

Cash Flow Analysis – This document showcases the incoming cash of a business, how this cash is used, and cash distributions to shareholders. While similar to a profit and loss statement, the results of this document can vary drastically depending on whether or not you extend credit to your customers or whether you consistently have outstanding balances with vendors..

Collateral - The collateral represents any asset that you have pledged as security for the 7a SBA loan. This can be any asset that has been pledged in order to obtain a business loan.

Debt Service – This is the amount of money that you are required to pay on a periodic (usually monthly) basis for any financial credit extended to a business or individual.

Due Diligence – In regards to lending, this is the process of when a lender assesses a business’ or individuals’ ability to repay borrowed funds, their income, and their assets.

Guarantee – This term, when discussed in lending, discusses the guarantees that will be made by a business or an individual regarding their 7a SBA loan or other business loan. The Small Business Administration and its affiliated lending banks generally always require that guarantees are made by the borrower in order to secure a business loan,

Intermediaries – This term refers to SBA advisories or loan packagers that assist individuals with applying for the 7a SBA loan,

Principal – The underlying capital received by a company via the 7a SBA loan program.

Profit and Loss Statement – This a formal financial document that showcases a business’ actual or expected income, expenses, and net profits/losses.

Senior Debt – In organizations that use several forms of business loans, senior debt is the first debt to be repaid in the event of business liquidation.

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