Behind the scenes of an SBA loan.
If you’re in a hurry for funds for your business there are options available to you, but an SBA loan might not meet your deadline.
The length of time from application to approval for an SBA loan varies between 60 and 90 days. As the applicant, you actually have some control over how quickly the process goes. This is because gathering financial information about your business is generally one of the things that can hold up the loan process. Therefore, if you’re in the market for a loan, the first thing you should do in preparation is to gather the required financial information about your business.
Another factor is the experience of the lender you are working with – which is why it’s wise to choose an experienced SBA lender for your loan. With SBA loans, applicants may not apply directly, they must work with an approved lending partner.
Gathering your business financial information early on gives you a clear picture of where you are financially and where you need to be for loan approval. If you don’t have a clear profit and loss statement or a sound business plan, you can take corrective action to improve.
Let’s look at the loan process for an SBA loan to understand your role.
What is an SBA loan?
An SBA loan is one underwritten in part by the U.S. government. The goal is to help business owners across America get the funds they need to grow the business. These loans are particularly helpful for newer businesses that don’t have a strong credit history and might otherwise have trouble getting financing.
With an SBA loan, the government guarantees up to 85 percent of the loan. This is a substantial benefit to lenders because it removes a lot of the risk for lending the money.
There are a few loan options available through SBA loans. The amount and terms vary based on the use of funds.
- SBA 7(a) Loan – Loans up to $5.5 million and 25-year terms for general purposes. The amount and term is dependant on how you will use the SBA loan funds for your business.
- CDC 504 Loans – Loans for purchasing business real estate or equipment. Loans are available with terms as long as 25 years.
- SBA Micro Loans – Loans with terms up to six years for repayment. These are smaller loans for funding up to $50,000.
SBA Loan Process Breakdown
The overall process for applying for an SBA loan is like most conventional loans. Responsibility for moving the process forward depends on both the business and the lender.
Step 1: Information Gathering and Submission – The business owner must gather business and personal information for consideration for the loan. This generally includes a pre-approval process to ensure your business meets the minimum requirements. If you have your financial house in order, this step can take just a few days. If not, it can take 30 days or more depending on how quickly you can gather the information.
Step 2: Lender Underwriting – In this step, the lender reviews all of the information and the loan application to determine if they are able to provide the loan. They will verify credit and other documentation. If it is a real estate transaction or equipment purchase, an appraisal may be required. Any portion that requires the services of a third-party vendor will depend on the vendor’s availability and may affect the timeline. Generally, this step takes between 10-14 days to complete.
Step 3: Lender Approval – Once the lender’s underwriting department has fully vetted the loan application and can soundly prove loan viability, the lender can move forward and submit for the SBA to approve the loan. From here they will set a closing date. This step can take 10-14 days.
Step 4: Loan Closing – This step is where the lender releases the funds to the business applicant and it can take between 7 and 10 days.
How long does it take to get an SBA loan?
As you can see in the process outlined above, it can take a minimum of 30 days to gain funding but as long as 90 days. Much of the time depends on how organized the business applicant is and their financial situation, along with the experience of the lender. An experienced lender knows the process inside and out and they can help navigate the process and move things along quickly.
If you are ready to apply for an SBA loan, contact us at Affinity Beyond Capital. We have helped small businesses of all sizes and industries get the funding they need to grow their business.