If you’re looking for capital with favorable terms for small businesses, consider the 7(a) loan program. One benefit of the 7(a) program is its flexibility, as the loans can cover a wide range of expenses to fit your business’s needs.
Let’s take a look at the allowable uses for 7(a) loans.
Which Expenses Can 7(a) Working Capital Loans Be Used For?
One key advantage of 7(a) working capital loans up to $500,000 is their ability to cover a wide variety of expenses. This helps small businesses manage costs like wages, rent, payroll, inventory, and more.
PPP loans had limited options for spending, but they were also forgivable if program requirements were met. SBA 7(a) loans have more flexibility on eligible spending, but the loans are not forgivable.
You may use SBA 7(a) working capital loan funds on one expense category or split them among multiple categories. The permissible categories include:
1) Payroll
Use 7(a) loan funds to cover payroll expenses, including salaried, hourly, part-time, and 1099 employees.
2) Operating Expenses
Cover short-term expenses such as marketing, membership programs, inventory purchases, and day-to-day expenses.
3) Rent
Make rent payments for your place of business using 7(a) loan funds.
4) Utilities
Cover all utility expenses incurred by your business.
7(a) Loan Example in Practice: Construction Industry
Sometimes it’s easier to understand a loan program by looking at a practical example. Let’s consider the allowable uses for a 7(a) loan of $500k or less obtained by a construction company.
For example:
1) Payroll
Use loan funds to pay laborers, temporary workers, skilled workers, equipment operators, and finishers.
2) Operating Expenses
Spend your funding on expenses like subcontractors, materials, transportation, gasoline, tools, etc.
3) Rent
Use 7(a) loan funds to make rent payments for your office.
4) Utilities
Use 7(a) funds for any utility expenses you might have.
With NEWITY, you can apply for an SBA 7(a) loan up to $500,000 in less than 10 minutes.
Have questions before you get started? Connect with NEWITY to see how a 7(a) working capital loan can help your business thrive in the years to come.
Get started with an SBA 7(a) Business Loan today!
