Managing cash flow is a multifaceted aspect of building your business. Many business owners obtain additional financing to expand the company or to support its existing operations. SBA loans, which are backed by the Small Business Administration, are a popular choice. If you are seeking capital, find out more about what SBA loan processing time looks like and what to expect throughout the process.
What is an SBA loan?
The Small Business Administration offers financial assistance in the form of various loans, including 7(a) loans, 504 loans, and microloans. The loans are partially guaranteed by the federal government. This means that if the borrower cannot repay the loan, then the lender can recover a certain percentage of the balance from the SBA. As a result, SBA loans generally provide a lower risk for lenders, which is good news for small business owners.
Proving eligibility for an SBA loan can be challenging, as the standards and requirements are fairly strict. However, the terms are flexible, and borrowers are typically able to secure lower interest rates. This makes SBA loans one of the more reasonable ways to secure financial support for a small business.
What is the SBA loan processing time?
If you’re a small business and you’re curious about the process of requesting financial help, what does the SBA loan processing time look like? Let’s break it down into steps.
1. Applying for the loan
The first step is to gather all of the documentation you will need for the application. Additionally, the type of SBA loan that you’re applying for will dictate what sort of questions are asked on the application. For example, if you’re applying for an SBA 7(a) loan, you’ll be asked about your citizenship status and other personal information. Additionally, you’ll be required to provide written documentation of how you intend to use the funds. General information required for an SBA loan application includes:
- Financial statements, including your profit and loss statements
- Loan application history
- Income tax returns
- Business license or certificate
Fortunately, in the digital age, much of the initial application may be done online. This streamlines the process and allows you to complete the initial application at a time that’s convenient for you.
Time: Typically from one to about 30 days
2. The lender underwrites the loan
An underwriter is a financial expert. They carefully examine all of your finances and consider if and how much of a risk you are to a lender. This helps determine your eligibility for your SBA loan. During this stage, the underwriter and lender may assess your:
- Income
- Assets
- Debts
- Property
The lender’s enrollment in the SBA Preferred Lender Program directly impacts how long this part of the process takes. If the lender isn’t in the program, the SBA must approve the loan before it’s underwritten. Lenders who are part of the program have the authority to underwrite the loan on behalf of the SBA, while those that are not must submit the application and any relevant data to the Small Business Administration for permission.
Time: Typically 10 to about 90 days, depending on the lender’s SBA Preferred Lender status
3. The lender approves your loan
Once your loan is approved, the lender starts drawing up the documents and sends you a commitment letter. This serves as a legally binding contract between the lender and the borrower, outlining the terms and conditions of the loan.
Time: Typically 10 to about 21 days.
4. The lender closes on the loan
Closing the loan is the last step of the process. During closing, the lender and borrower both sign any documents pertaining to the loan. Some lenders refer to it as a settlement instead of a closing. While this part of the process generally takes around two weeks, some lenders warn that it can take up to 90 days.
Time: Typically 7 to about 14 days.
How long does the SBA loan process take?
While there is no set number of days that it takes to go from applying for a loan to receiving the funds, it generally takes somewhere between 30 and 90 days. Factors that impact the duration of the process include everything from how prepared you are during the initial application to the lender’s status with the SBA.
What determines the SBA loan timeline?
No two cases are exactly alike, and there are a few variables here that can impact your SBA loan processing time.
- The type of loan program you’re applying for
- The amount of money you’re applying for
- The lender you’re working with
1. The type of loan program you apply for
The type of loan that you’re applying for significantly impacts the timeline. For example, SBA microloans, which have a maximum of $50,000, may not take as long to review and underwrite as an SBA 7(a) loan that has a maximum of $5 million.
2. The amount of money you’re applying for
Larger loans may take longer to be approved. This is because the lender must decide if your business really needs such a large amount and whether your company can afford to take on a larger monthly repayment obligation.
3. The lender you’re working with
Each type of SBA loan has its own requirements. The same is true for individual lenders. Additionally, there are SBA requirements that you’re responsible for meeting. Finally, lenders who are enrolled in the SBA Preferred Lender Program typically provide funding faster than lenders who aren’t, as the SBA must review applications for lenders outside the program.
Should you take out an SBA loan or another loan?
While SBA loans are a common solution for small businesses all across the country, you do have options. Some alternatives to SBA loans include:
- Credit cards: Easier to qualify for and offer certain perks, but interest rates are higher
- Lines of credit: Higher limits and lower interest rates, compared to credit cards
- Merchant cash advances: Cash that’s fronted in exchange for a percentage of future sales, until the balance is paid off
- Crowdfunding: Funding isn’t guaranteed, but it also doesn’t need to be paid back
- Term loans: A lump sum that’s repaid over a fixed period of time
- Short-term loans: Repaid faster than a term loan with more frequent payments
- Small business grants: Stricter approval criteria, but don’t need to be paid back
How can you find the best type of financial support for your business?
As a small business, there are plenty of ways to find extra financing, whatever you may need it for. If you need help deciding, consider the following questions:
- How much money do I want to borrow?
- What do I want to use this money for?
- What do I have working in my favor, in terms of eligibility?
- What kind of monthly payments can I manage?
- How quickly and frequently can I make my repayments?
- If I’m not able to repay the loan, what am I able to offer as collateral, if anything?
- How soon do I need the money?
This information may help you as you determine what you might be able to qualify for and if it’s the best option for your small business.
Applying for your SBA loan
SBA loans are a common way for small businesses to get on track financially. The SBA loan processing time is anywhere between approximately 30 to 90 days. Your individual experience will vary depending on factors like the type of loan program you’re applying for, the amount of money you’re asking for, and the lender you’re working with. Through thorough due diligence and careful consideration of your own situation, you may better understand if you should pursue an SBA loan or another type of loan.
Find out if you pre-qualify for an SBA loan today.
FAQs
What factors affect SBA loan processing time?
The amount and complexity of the loan, the lender’s status as an SBA Preferred Lender, and your personal and business credit history may all impact the processing timeline for SBA loans. Larger loan amounts, business acquisitions, or real estate transactions often require more detailed review. Additionally, your credit profile, time in business, cash flow stability, and responsiveness to lender inquiries all play a role in how efficiently the application moves forward.
How long does SBA underwriting take?
The SBA underwriting process typically takes at least a few weeks. For smaller loans from an SBA Preferred Lender, the process may take around two weeks. Larger loans and loans from lenders who are not part of the Preferred Lender Program may take up to three months.
Is the SBA 7(a) loan process faster than other SBA loans?
In some cases, SBA 7(a) loans may be faster than other types of SBA loans. However, timelines still vary based on the structure of the transaction and the borrower’s readiness. For example, a straightforward working capital request may move more efficiently than a loan involving real estate or a business acquisition.
Can you speed up the SBA loan approval process?
While there are no guaranteed shortcuts, you may help speed up the process by preparing in advance. Keeping financial statements current, maintaining organized records, reviewing your credit profile, and clearly outlining how funds will support business growth all contribute to a smoother experience.
