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The United States Small Business Administration (SBA) helps business owners access the funds they need to start, grow, and succeed in their business. These loans are often easier to obtain than some traditional loans. Still, SBA loans can take much longer to approve and fund than most loans, often 60 to 90 days. For this reason, SBA loans are not the right choice for business owners who need cash fast.
Here’s what you need to know about SBA loan approval times and how they compare to other business financing options.
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Overview of SBA Loans
The SBA does not lend money directly to small business owners. Instead, the SBA guarantees up to 85% of the loan amount, depending on the loan program and amount. This reduces the risk of lending applicants money and encourages SBA-approved lenders to work with small business applicants they might not otherwise approve. That said, there are several SBA loan programs, each with unique eligibility requirements and terms:
- SBA 7(a) Loans: The SBA 7(a) program offers several types of loans up to $5 million available for various business purposes. Standard 7(a) loans and small 7(a) loans come with SBA turnaround times of between five and 10 business days, but the process takes longer.
- SBA Express Loans: SBA Express loans are available for up to $500,000, with repayment terms of up to 25 years for real estate and five to 10 years for other types of loans. Express loans fall under the 7(a) umbrella; however, the program offers accelerated approval times. Individual lenders make eligibility decisions, but the SBA’s turnaround time is only 36 hours.
- Certified Development Corporation (CDC)/504 Loans: CDC/504 loans can be used for the purchase of equipment and real estate. Loans are available up to $5 million, with 10 and 20 year repayment terms.
- SBA microloans: Microloans top out at $50,000, although the average microloan is only $13,000. The minimum repayment term is six years and interest rates range from 8% to 13%.
Although SBA loans may be easier to obtain than other types of business financing, the application process is lengthy. You must provide complete documentation, including a business plan, copies of corporate and personal income tax returns, business balance sheets, profit and loss statements, and a list of current business debts.
How to get an SBA loan approved
The SBA loan approval process takes 30-90 days from application to funding. However, this period varies depending on the lender and the type of loan. The exact steps to getting an SBA loan can also differ from lender to lender, but there are some general steps in the approval process:
- Loan request. The SBA loan application process is more demanding than that of traditional lenders, and potential borrowers must submit numerous supporting documents. For this reason, the preparation of the application can take up to 30 days. However, you can complete an application more quickly if you have already gathered the necessary documentation.
- Examination of applications and subscription. Once the application is submitted, the lender will review your credit score and financial data. This process typically takes 10-14 days, including the underwriting process, but may take longer for lenders who are not part of the SBA’s Preferred Lender Program. Similarly, if collateral is required, the lender may order an appraisal during the underwriting process. Based on this review, the lender determines the loan amount and interest rate you qualify for.
- Loan agreement. After approval, it usually takes 10-21 days for the lender to prepare the loan agreement and commitment letter. During this time, you should review the loan agreement to make sure all terms are acceptable.
- Closing and financing. Closing and funding typically occurs 7-14 days after finalizing the loan amount, repayment term, and interest rate in the Commitment Letter. If the lender contacts you with additional questions or requests during this time, respond promptly to move the process forward.
How will I know if my SBA loan is approved?
If your loan is approved, the SBA will send you an email with loan details. Contact the SBA directly if you have not received an email and would like to check the status of your application. Depending on your lender, you can also check the status of your application online or by contacting your loan officer.
How long does it take to get SBA loan funds after an approval?
After an SBA loan is approved, it usually takes about five days for the lender to disburse the loan funds, but it can take up to 14 days. That said, the actual time it takes for you to receive the loan proceeds depends on the lender and the business bank.
SBA loan process compared to other business loans
Long SBA loan approval times don’t match the borrowing needs of every small business owner. Other business loans can provide funds more quickly and, sometimes, with less stringent application requirements. Here’s how the SBA loan process compares to other common financing options:
- Business lines of credit. A business line of credit allows you to draw funds as needed and only pay interest on the amount borrowed. Approval times are shorter than for an SBA loan, with funds sometimes available as little as 24 hours after an application is submitted. Business lines of credit generally have lower borrowing limits than SBA loans, but they are renewable so you can access the money again once the balance is paid off.
- Online loans. Several online lenders offer business loans with fast approval times, sometimes as early as the same day. These lenders often work with businesses that may not be eligible for financing from a traditional bank. However, online loans tend to have higher interest rates and shorter repayment terms than SBA loans.
- Equipment financing. Equipment financing is a type of business loan that business owners can use to purchase equipment or machinery. These loans generally have shorter repayment terms than SBA loans and may also have higher interest rates. Funding can be available in just 24 hours or take several weeks.
- Alternative loans. Alternative loans are another type of financing that can have quick approval times, some with same day approval. These loans are available from many online lenders and are used for a variety of purposes, including working capital, equipment financing, and expansion. However, alternative loans also tend to have higher interest rates than SBA loans.
- Personal loans. Getting a personal loan can be much faster than getting an SBA loan because the application process is generally simpler and approval times are shorter. However, personal loans generally have shorter repayment terms and higher interest rates than SBA loans. Additionally, some lenders limit the use of personal loans for business purposes.
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