U.S. Small Business Administration (SBA) loans are an ideal source of financing for many business owners. Most SBA loans aren’t issued by the SBA. Rather, they are partially guaranteed by the organization to encourage authorized lenders to extend financing. These loans are designed to support your business, providing competitive interest rates, relatively low processing/servicing fees and highly flexible terms. However, these loans are prone to long application processing times, especially since the COVID-19 pandemic.
Know all the loan types in order to get the right one. If something doesn't make sense or you are not sure you understand, ask for help. Patience, diligence and fortitude are great traits -You’re going to need them.
Read on to learn more about SBA loans, how they may benefit your business and the application turnaround times to expect.
Bottom Line – How Long Does It Take to Get a Loan?
Prior to the COVID-19 pandemic, which has stressed the SBA’s financing channels, the approval turnaround time for most SBA loans was fairly expedient and consistent. Today, it tends to be slower and less predictable, so you might want to explore how long does it take to get an SBA loan. That said, we offer the program-specific guidance below.
|Type of Loan||Overall Timeline|
|SBA 7(a)||60 to 90 days|
|SBA CDC/504||60 to 180 days|
|SBA Microloans||30 to 90 days|
SBA 7(a) Loans – Overall Timeline of 60 to 90 days
The most popular SBA loan product is the standard 7(a) loan, which can be used for funding working capital, acquiring property, plant and equipment and refinancing existing business debt. With highly flexible terms and a maximum loan limit of $5 million, these loans are very popular with a variety of borrowers. If this type of loan appeals to you, you might want to look into the SBA 7a loan requirements. Unfortunately, the strong demand can result in long processing times.
Below, we conservatively estimate the amount of time you can expect for each leg of the application process.
- On average, it takes two days to find an appropriate lender. For many borrowers, the search can be shorter, but be sure to spend enough time to identify an optimal SBA lender.
- It can take up to 30 days to gather the loan documentation and submit the application. This step is the lengthiest aspect of the application process and the most work for you. However, with an organized approach, the timeline for this step can be reduced to a few days.
- Following submission, you can expect it to take two to three weeks to underwrite the loan. Since the COVID-19 pandemic, this step can often take longer.
- If approved, you face another one to two weeks to close the loan and obtain your funds. However, this final step also has the potential to run longer.
The estimates above relate to typical SBA 7(a) loans, but the SBA also offers express products designed to expedite the funding process. On average, the overall timeline for an express loan is 30 to 60 days as opposed to the standard timeline of 60 to 90 days. However, while the express products offer quicker access to cash, they carry lower loan limits, capping at $350,000.
SBA CDC/504 Loans – Overall Timeline of 60 to 180 days
The SBA CDC/504 program is designed to help small businesses acquire long term, fixed-rate financing for fixed asset acquisitions and expansion and modernization initiatives. The program is facilitated via certified development companies (CDCs), and therefore requires approval by both the CDC and the SBA.
This process can span from 60 to 180 days, including the time necessary to gather the loan documentation, coordinate with a CDC, wait on the SBA for a final loan decision, and close the loan and obtain your funds.
The longest single component of this process is is after loan is completed and funds escrowed. These loans are packaged and sold off monthly, so 30-60 days of the timeline is this post approval step.
SBA Microloans – Overall Timeline of 30 to 90 days
As its name implies, the SBA Microloan program is for relatively small loans. The program limit is $50,000. The SBA directly finances qualified non-profit intermediaries that provide downstream funding to small business owners, entrepreneurs, and certain non-profit child care centers.
The involvement of an intermediary can make these loans somewhat confusing for new borrowers, but the benefits include lenient credit score requirements, necessitate less documentation and relatively fast processing times. On average, the entire timeline spans from 30 to 90 days.
Pro Tip: Given that applying for the SBA loan can take weeks by itself, if you don't have the time for this lengthy process, we encourage you to read how to qualify for a small business loan.
Benefits of SBA Loans
The supportive nature of the SBA programs enable small businesses to obtain loans that are otherwise unattainable – with relatively advantageous terms. However, given the high volume of paperwork and documentation required, the application process can take some time.
That said, it’s usually worth the wait. Across its diverse set of loans, the SBA offers the following benefits to borrowers:
- Relatively low interest rates with options for variable-rate and fixed-rate structures
- Generally, lenient collateral requirements for loans under $25,000
- Long terms for property, plant, and equipment financing
- Relatively high borrowing limits and very low minimum loan requirements
- Minimal loan origination and servicing fees
These benefits exist largely due to the guarantees associated with SBA loans. SBA backing greatly reduces credit risk for lenders and allows them more underwriting flexibility.
SBA Loan Program Overview
At a high level, the SBA sponsors following three lending programs:
SBA 7(a) loans – This is the SBA’s most popular program. It consists of seven distinct types of loans designed to cover virtually all normal small business circumstances and needs. The SBA guarantees 85 percent on amounts up to $150,000 and 75 percent on amounts greater than $150,000 for standard loans. For specialty loans, the guarantee varies from 50 percent to 90 percent.
SBA CDC/504 loans – This program is designed to help small businesses finance the acquisition of fixed assets for expansion and modernization. It entails the utilization of a third-party, a certified development company (CDC). As a result, these loans have a three-tiered capital structure. The top 50 percent of any loan represents the senior backing of the CDC. The SBA completely backs the middle 40 percent, and the bottom 10 percent represents equity from the borrower.
SBA Microloans – Unlike the 7(a) and CDC/504 programs, the SBA does not guarantee any aspect of its Microloans. This program reflects direct financing to qualified non-profit intermediaries that provide downstream loans of up to $50,000 to small business owners, entrepreneurs, and non-profit child care centers.
For more detail on the SBA’s various loan programs, please visit the following link: SBA Loan Programs.
SBA Loan Process
Aside from the Microloan program, the SBA does not currently lend money on a direct basis. It works through a group of authorized lenders to issue loans, providing guarantees to incentivize them.
If you’re interested in an SBA loan, you'll need to consult with an authorized lender to identify an optimal loan, terms and conditions. The best lenders have ample experience on this front and can help streamline the process for you. To facilitate your effort, we offer the information below.
- Operate (or intend to operate) for profit in the U.S. or its territories
- Be defined as a small business by the SBA
- Demonstrate, as the business owner, reasonable equity to invest in your business
- Demonstrate efforts to use alternative financial resources, including personal assets, before seeking financial assistance
- Outline the viable business purpose for which you intend to use the funds, inclusive of a forecast of adequate cash flows to service the debt
- In certain circumstances, carry adequate property/casualty insurance on business assets and life insurance on owners and/or key employees
Loan Application Process:
- Select an SBA Lender
- Gather Your Documentation and Submit an Application
- If Approved, Close the Loan and Obtain Funding
Step 1 – Select an SBA Lender
Identify the SBA-approved lender with which you’d like to work. Perhaps, it’s your existing commercial bank. If you’re having difficulty locating a lender, the SBA offers a lender match tool that can help you connect with a lender in your area.
All authorized lenders have cleared a screening process, but it’s always smart to look for lenders that have experience issuing SBA loans. These institutions are best positioned to expedite the application process, answer complex questions and increase your chances for approval.
Step 2 – Gather Your Documentation and Submit an Application
Once you select a lender, you can apply for an SBA loan. The lender will guide you through the process of completing pertinent SBA application forms and attaching necessary supplemental documentation. The documentation requirements vary based on lender and type of loan, but the most commonly required documents are outlined below.
- Borrower information forms (Forms 1919 and 1920 for SBA 7(a) loans)
- Personal background and financial statement forms (Forms 912 and 413 for SBA 7(a) loans)
- Business financial statements
- Business certificate or license
- Loan application history
- Income tax returns
- Resumes/professional biographies for each business owner
- Business overview and history
For a comprehensive checklist of likely documentation requirements, please refer to the following link to the most popular SBA loan program: SBA 7(a) Loan Application Checklist.
Step 3 – If Approved, Close the Loan and Obtain Funding
After you’ve submitted your SBA loan application, you need to wait for approval. In some instances, preferred lenders have the right to approve loans without the SBA reviewing the application, which can expedite the process. In other instances, the SBA retains control over credit decisions.
Regardless, you must secure approval to obtain funding. If approved, your lender will start the closing process, which entails securing collateral, preparing loan documents and fulfilling any other SBA authorization requirements. Your lender will disburse your funds according to the agreed upon terms.
Tips to Expedite the Application Process
While the process for obtaining an SBA loan can be lengthy, there are some things you can do to expedite the process, including those outlined below.
- Identify a lender that is authorized to do more than simply submit a loan application package and request an SBA guarantee. This entails working with a certified lender or a preferred lender. A certified lender has met performance standards that enable the SBA to approve its loan requests by conducting credit reviews only, instead of complete reviews of applications. A preferred lender has the highest level of authority and is able to process and close loans independently.
- Gather your documentation ahead of time. While this may be difficult to do when you don’t have an optimal loan identified, some required information is fairly standard. This includes personal financial information, resumes/professional biographies for each business owner, a business overview, along with a certificate or license, three years of business financial statements, three years of income tax returns, and your complete loan application history.
- Strive to submit required information electronically. In some cases, this may be your only option. Nevertheless, if given the option to submit hardcopy documentation, elect electronic submission. It will undoubtedly shorten the process.
While SBA loans can take some time to secure, they can be highly beneficial, saving you on interest costs and fees and allowing you a high degree of flexibility relative to conventional financing arrangements.
Across the spectrum of SBA lenders, Finimpact.com ranks Credibly near the top of the list. The lender has achieved above-average scores for its consistent willingness to extend loans below SBA maximum limits, while facilitating the loan application and underwriting process in a highly efficient manner. If you need funding, this lender is definitely worth a look. For more information on Credibly, please visit the following link: Finimpact.com Credibly Review.