Many people ask, “How long does it take to get an SBA loan?”. The answer is that it depends on several factors, including the type of business, location, and credit score. However, most business owners can expect to wait anywhere from 30-180 days before being approved for their grant or business loan. This article will break down the steps involved for an SBA loan, how long the application process typically takes and what you should do if you find yourself needing some funding quickly!
When cash is tight, business owners need access to financing sooner than later. Applying for an SBA or SBA 7(a) loan is often a longer process than other types of loans, but it’s worth the wait. That’s because the SBA application process can be a long, drawn-out affair. As a result, you may have to wait months or even longer without knowing if your SBA loan is finally approved. That said, you do have options. If you need to get your funds sooner, you can explore a traditional bank loan or other small business loan options.
When applying for an SBA loan, keep in mind that you’re not applying to a government agency. Instead, you would work with a vetted lender that follows the rules and regulations set by them. Also, since more steps are involved in this lending process than if you applied directly to the government agency, it can take longer to close your loan and sign the final paperwork once approved for financing.
In this article, we’ll discuss how long it takes to get an SBA loan. You could receive the funds in your account anywhere from 30 days to several months or longer; emergency lifelines are not what SBA is about up until recently with the advent of the Paycheck Protection Program (PPP) Loan and Economic Injury Disaster Loan (EIDL). Hence, they should be used as a financial tool with which you must prepare beforehand.
In this guide, we’ll explore the length of time it takes for the SBA loan approval process and answer the following questions:
- What are the benefits of waiting longer for SBA loans?
- What paperwork do I need to gather for my SBA loan application?
- What is an SBA 7 (a) loan & how long does it take to get approved?
- What is an SBA express loan & how long does it take to get approved?
- What is an SBA 504 loan & how long does it take to get approved?
- What is an SBA microloan & how long does it take for approval?
- What is a Paycheck Protection Program (PPP) Loan & how long does it take for approval?
What are the benefits of waiting longer for SBA loans?
You might be wondering what advantages an SBA loan has instead of other forms of business funding like a merchant cash advance, equipment financing, or bad credit business loans, especially if you have to wait long for approval. Though the low interest rates that SBA loans charge are at the forefront of their selling point, you’ll also find a lot to be impressed with in terms of what you don’t have to sacrifice equity in your business.
A significant benefit of the program is that the loans are long-term. Loan repayment terms vary, with some extending more than two decades (for non-real estate loans). In addition, the Small Business Administration sets caps on the interest that business lending borrowers should repay. Combining both the cap and longer term results in a lower interest rate for businesses experiencing cash flow issues.
The process for obtaining an SBA loan can sometimes be rather lengthy, but we have a few tips that may help.
What paperwork do I need to gather for my SBA loan application?
SBA Loan Tip: Gather your loan documents ahead of time
Getting an SBA loan can take time. Gathering the needed documents into a complete application package is one way to save some time during the approval process.
The SBA loan application process generally takes 45 days or more in some cases, of which a business owner will spend the majority of time gathering paperwork for the lender. The good news is that the SBA has a checklist that makes this much easier and ensures business owners are as prepared as possible before beginning the SBA loan process.
The SBA Loan paperwork checklist includes but is not limited to:
Borrower Information Form (SBA Form 1919)
Personal Background and Financial Statement
- Statement of Personal History: SBA Form 912
- Personal Financial Statement: SBA Form 413 (Not required, but available for lenders to use)
Business Financial Statement
- Year-End Profit and Loss (P&L) Statement for the last three years
- Year-End Balance Sheet for the last three years, including a detailed debt schedule
- Reconciliation of Net Worth
- Interim Balance Sheet
- Interim Profit & Loss Statements
- Projected Financial Statements that include month-to-month cash flow projections for at least a one-year period.
Business Licenses & Certificates
Loan Application History
Business Tax Returns
Business Overview and History
Additional Documents (If Purchasing an Existing Business)
- Current balance sheet and P&L statement of business to be purchased
- Previous three years’ federal income tax returns of the business to be purchased
- Proposed Bill of Sale including Terms of Sale
- Asking price with the schedule of inventory, machinery and equipment, furniture and fixtures
- Franchise, jobber, or licensing agreements
- Proof of equity injection
- Additional SBA forms may be required based on the specific use of proceeds or fees paid by the applicant to a loans package, broker, or agent
- In some cases, depending on how large the loan is, the bank might require a business plan to get a better sense of what your plans are for the loan proceeds and what resources you’ll be putting into place to repay the loan.
So really, how long does it take to get an SBA loan?
Processing times for business loans can vary from lender to lender, and the reasons for this are many. SBA loans need a little more processing time than other types of traditional loans, as lenders must look into detail about the purpose of financing.
If you’ve been approved for an SBA loan, be ready to wait some more. As you move closer to closing your small business loan, there will be more documents for you to fill out as part of the SBA loan closing process. From there, it takes between one and two weeks for the money to be deposited into your account after the processor finishes their work. Therefore, in total, it could take up to six or more for you to have access to those funds from start to finish.
What is an SBA 7 (a) loan & how long does it take to get approved?
The most popular SBA loan product is the standard 7(a) loan, which can be used for working capital, acquiring equipment, refinancing other business debt, and various other purposes. Though its flexibility in use makes it very versatile, it cannot exceed a $5 million loan amount.
The SBA 7(a) loan program is always in high demand, so there’s going to be a long wait. The timing for processing from start to finish will depend on you and your lender, but it typically takes about two-three months.
What is an SBA express loan & how long does it take for approval?
Waiting too long for a traditional SBA loan may not be feasible, depending on your situation. However, if you need an emergency loan, the SBA Express Program may be worth considering. It’s a simplified version of the 7 (a) product with a maximum loan amount of $350,000. But this means it may be quicker to approve due to shorter lender underwriting times.
The average turnaround time for SBA express loans generally takes 36 hours. And that doesn’t include the time it takes to get approval from your lender, which may add a few weeks. It usually takes 60 to 90 days for lenders to process an SBA loan application, but your overall timeline will look more like 30 to 60 days if you’re going the express loan route.
What is an SBA 504 loan & how long does it take for approval?
We’re going to talk about the Small Business Administration’s 504 loan program. If you aren’t familiar with it already, it helps small businesses get loans to finance the acquisition of fixed assets for expansion and modernization. Before the lender can process an SBA 504 loan, it must first go through a Certified Development Company-a step that throws off the typical processing timeline.
Because SBA loans require both approval from the SBA and the Certified Development Companies, it can take some time to complete the process. As a result, the time it will take for you to receive your SBA 504/CDC loan approval varies. On average, you can expect to wait about a month and a half after you submit your application for financing. SBA loans are typically processed fairly quickly by lenders, but the processing times can be as long as six months for this business financing program.
What is an SBA microloan & how long does it take for approval?
The SBA has a microloan program, which, as the name implies, is for smaller amounts. It caps at $50,000. While these loans may not provide the same financing size as larger loans, the processing time is usually faster and often doesn’t require a business plan. In as little as a month, you can have the funds in your account. In some cases, though, it can take up to three months.
Although SBA microloans are beneficial for small businesses, they can be less straightforward than larger loans. That’s because the SBA initially lends to an intermediary lender or bank at a discount. Then, the intermediary lender or bank will have the authority to issue loans to the business.
If you’re an entrepreneur with less than perfect credit, the microloan could be the right product for you. Among the different types of SBA loans, microloans are popular among minority women entrepreneurs. A consideration concerning microloans is their repayment term: 10 years.
What is the SBA Paycheck Protection Program (PPP) & how long does it take for approval?
The Paycheck Protection Program (PPP) is a type of loan that the SBA offers to keep employees on the payroll. The PPP has a speedy approval process, taking as little as two business days for processing. The SBA created the PPP to stimulate the small business economy after the Covid 19 pandemic.
In most cases, the lender will forgive your loan if you use 60% or more on payroll, making the loan essentially equivalent to free money. Excellent credit or excessive documentation isn’t required either. For more information and to fill out your own PPP application, click here.
When you need business loans fast, patience doesn’t always feel like a virtue.
As a small business owner, it is important to maintain your patience when pursuing an SBA loan. However, you don’t have to wait for the SBA loan approval process. These days, many lenders have funding options available to business owners that weren’t available 5-10 years ago.
United Capital Source can assist with all types of funding. Whether you want to get an SBA loan, small business line of credit, or other types of working capital loans, we can provide you with a free consultation and get you a loan approval on certain programs within 24 hours and have money in your bank account within a few business days.
Whatever your business funding needs, United Capital Source has the lenders and the resources to make it happen!