SBA loans, which are backed by the U.S. Small Business Administration, exist to help small business owners access the capital they need to grow their companies. They’re offered by SBA-approved lenders and are less risky as the SBA guarantees up to 85 percent of each loan that’s issued.
Despite their competitive rates and other attractive features, they may not be ideal for your business if you need fast cash. On average, it can take between 60 and 90 days from application and funding – the larger the loan amount, the longer the lending timeline. In this case, you could be better off seeking alternative financing solutions instead.
The SBA Loan Process
Below is a step-by-step breakdown of the SBA loan process:
- Step 1: Gather the documents needed to apply for an SBA loan and submit an application. This step generally takes between one and 30 days to complete.
- Step 2: Wait for the lender to underwrite the loan and issue a lending decision. Expect a response between 10 and 14 days from the application submission date.
- Step 3: Receive a lending decision once underwriting is complete. You’ll get correspondence regarding the decision along with a commitment letter (if approved for funding) between 10 and 21 days after the loan is underwritten.
- Step 4: Accept the loan offer and close on the loan. Most closings take place between 7 and 10 days after accepting the loan offer and signing the loan documents.
Usual SBA Loan Approval Timelines
Here are some average approval timelines for SBA loans:
SBA 7(a) Loan
SBA 7(a) loans are ideal for small business owners seeking short- or long-term working capital to purchase supplies, furniture, fixtures, buildings, and lands, refinance the existing business debt or expand operations. Expect to wait two to three months to get the loan approved and funded.
SBA 504 Loan
SBA 504 loans provide long-term fixed-rate financing for major fixed assets, like facilities (both new and used), land, long-term equipment and machinery. The funding timeline is between 1 to 1.5 months, but some applicants wait as long as six months to receive loan proceeds.
SBA Microloan
SBA microloans, which are smaller loans designed to help small businesses and qualifying non-profit childcare centers launch and grow, also come with an approval and funding timeline of 30 to 90 days.
SBA Disaster Loan
SBA disaster loans come with slightly faster processing times of two to three weeks, followed by a disbursement window of up to five days.
SBA Express Loan
You could apply and get the loan proceeds in just 30 to 60 days for an SBA Express Loan.
Factors That Affect How Long an SBA Loan Takes
SBA Loans are a Bureaucratic Institution
Navigating the SBA guidelines can be challenging for lenders, often leading to unnecessary delays. This was especially true during the coronavirus crisis when many established business owners who desperately needed funding were turned away.
High Demand
Periods, where SBA loan requests are in high demand, could lead to processing delays. Lenders are only equipped to handle so many loan applications at a time, so you should prepare to wait a bit longer to receive a lending decision.
Type of SBA Loan
As mentioned above, most SBA loan products come with processing times of 60 to 90 days. However, you could get funding faster if you apply and are approved for an SBA Disaster Loan or SBA Express Loan.
Completeness of Requirements
If there are errors in the application or you omit important information, the processing of your loan application can be delayed. The same applies if requested documents are missing from the application package or submitted at a later date, preventing the underwriter from reviewing the file and making a lending decision.
Preferred Lenders
Financial institutions that receive SBA approval are allowed to originate loans. But if you want a shorter lending process, find an SBA Preferred Lender, as they handle credit checks and loan underwriting without much intervention from the SBA.
Where to Get an SBA Loan
There’s no shortage of lenders offering SBA loans. But be sure to choose a reputable lender with a track record of success offering an assortment of small business funding solutions. Or you can explore other loan options available to small businesses, like:
- Small business loans: Loans of $10,000 to $5 million with six- to 10-year terms available to borrowers with three or more months in business and at least $5,000 in monthly gross sales
- Business lines of credit: Identical loan amounts and terms, along with business experience and earning requirements as small business loans, but a minimum FICO score of 600 is required
- Equipment financing: Loans between $10,000 and $5 million with one- to five-year terms are accessible with a 580 or higher credit score without having to meet the business experience or monthly gross sales requirements
- AR financing: Loans between $10,000 and $5 million with 6-month to 10- year terms are available to business owners with $500,000 in annual gross sales that are able to provide AR aging reports
- Fix N Flip loans: Tthese loans come with interest rates as low as 8.9 percent and are ideal for real estate investors with credit scores of at least 650
Merchant cash advances and asset-based loans have the same requirements as small business loans, but the financing terms are a bit more flexible.
