SBA Loan Timeline
How Long Will the Lender Take to Approve Your SBA Loan?
Key Takeaways
SBA loans are the most difficult to qualify for, and its loan application process could be the lengthiest among small business loan options.
The SBA Loan application is composed of four stages: collecting and gathering documents, application and underwriting, loan approval, and finally, closing. In general, approval for SBA loans could take a few weeks to six months, depending on the type of loan you’re applying for.
If you’re not in a hurry to access funding and in need of a loan with flexible terms, waiting for the SBA loan approval could be worthwhile. However, if time is not on your side, it would make sense to consider other alternative loan options.
Cash flow is one of the biggest challenges that business owners face. Many will work with seasoned lenders to ensure that they have access to business financing if and when cash flow begins to dwindle.
Some of the most affordable financing options available to small businesses are SBA loans. SBA loans are government-backed loans that offer up to 85% to 90% guarantee, meaning the government will pay a portion of the loan should the business default for any reason. This guarantee incentivizes lenders to offer favorable terms to small business owners since there is lesser risk involved on their side.
However, the loan application process for SBA loans can be long and time-consuming, which can be intimidating for some applicants. If you’re looking to apply for one and hoping that you’re approved the following week, this likely isn’t the most suitable financing solution for you.
In this article, we’ll explore the details of the SBA loan timeline so you can better understand the wait times for each type.
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How Long Does It Take to Get an SBA Loan?
The SBA loan process varies drastically, depending on the type of SBA loan and lender you're working with. In general, it usually takes at least 30 to 90 days from application to funding.
One of the most important things to note with regard to SBA loans is that you’re not merely asking a lender to grant you financing, you’re asking the federal government to essentially be your guarantor. There are two parties who have to review and approve your application which is why the application process for SBA loans can be twice as long as that of conventional loans.
The SBA Loan Approval Process
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1. Collecting and Gathering Documents
The most notable reason why SBA loan applications tend to take a long time is the mountain-load of paperwork you have to submit. Since the SBA is taking on a big risk by guaranteeing large portions of these loans, they only take on the most creditworthy applicants. Plain and simple, proving your creditworthiness can require a lot of paperwork. The list of documents you’ll need to submit with your application includes (but is not limited to):
Business and personal financial statements
Government-issued ID
Credit reports
Business and personal bank statements
Business and personal tax returns
Business history
Copy of your business lease and registration
Collateral documents
Resumes (including co-owners and major stockholders)
Business plans
Business loan proposal
There’s a good chance the SBA will ask for even more documents than what we’ve listed here, which could drag the application process out even longer. Check out this SBA checklist outlining the documents and forms the business owner needs to submit during his or her application.
Overall, obtaining and compiling these documents can take approximately a few days to a month. It’s worth noting that submitting a complete set of required documents and paperwork upon application can help expedite the loan approval process.
In addition to the above documents, applicants will also have to fill out forms as required by the lender and the SBA. These forms will likely take a few days to complete as some may require you to consult with your lawyer or accountant.
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2. Application and Underwriting Process
Once all your documents have been submitted, the lenders will evaluate your qualifications and start the underwriting process. This is usually the most daunting stage for borrowers as the loan providers will scrutinize every part of your financial and credit history to determine your eligibility.
Be as open and transparent as possible with the lenders. Answer their questions honestly. Attempting to lie or falsify information will only hurt your application.
During the underwriting process, the bank or alternative lenders will determine your capability to pay the loan back. At the very least, they will examine the following:
Personal and business credit history (which involves the lenders making a hard inquiry)
Collateral and its value
History with other lenders
Your business’ financial forecasts, revenue, and cash flow
Debt-to-income ratio (personal and business)
Legal issues that you might have encountered in the past(such as tax issues)
The entire underwriting process can take at least seven days to a maximum of 14 days. The lenders and the SBA want to make sure that you can afford to repay the loan and that you’ll make those repayments on time. Remember, the guarantee from the federal government is intended to serve as a last resort if your business becomes unable to pay off the loan balance.
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3. Loan Approval
If you pass the underwriting process, the next step is approval. At this stage, the lenders will confirm that your business meets all the requirements and that you’re eligible for your SBA loan. They will send your application to the SBA which then must review it. This phase takes about five to seven days.
Once the SBA approves you for the loan, the lender will send out a commitment letter or loan agreement that outlines the loan’s terms, including the loan amount, interest rate, repayment period, and other terms. Review and sign the document only if and when you find the terms favorable. The lenders may also require you to submit additional documentation like articles of organization, business leases, franchise agreements, and more.
The entire loan approval stage of the SBA loan application process can take 10 to 21 days, depending on how fast you can provide the additional documents. The lender might reach out to you once in a while, especially if they need you to submit additional documents. They will also keep you appraised of any updates to the progress of your SBA loan application.
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4. Closing
After you submit the additional documents and sign the commitment letter, you (the borrower) and the lender move on to the loan closing. This entire process will take about 10 to 14 days.
During the loan closing period, the lending company will review additional documents like titles and environmental reports. At this stage, they will draw up the contract for signing and review any additional documents. Once everything is in place, the lender will transfer the funds to your business account, and you can immediately use the funds towards any eligible business initiatives.
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Types of SBA Loans
Is it Worth Waiting for Your SBA Loan Approval?
Many people may wonder if it's worth the wait to get approved for an SBA loan, which can take months. The answer to this question depends on your specific needs. However, borrowers with excellent credit can receive many benefits from SBA loans that aren't available with other loan options.
Firstly, creditworthy borrowers can receive up to $5 million in funding, which can be used for various business purposes like working capital, expansion, inventory, and equipment purchases.
Secondly, SBA loans are quite affordable, with lower interest rates than conventional bank loans. Typically, the average interest rate ranges from 6% to 7%. In fact, the SBA has set a maximum limit on the interest rate that banks can charge small business owners, which means you won't be overcharged.
Lastly, SBA loans have longer repayment periods, with repayment terms ranging from seven years for working capital to 25 years for real estate acquisition. This longer repayment period leads to lower monthly payments and helps businesses maintain a stable cash flow.
While waiting for approval for an SBA loan can be a bit of a waiting game, the benefits that come with approval are worth it.
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Tips on How to Speed Up the Process
Securing an SBA loan is a significant milestone for your business, and expediting the process is crucial for maintaining momentum. Here are some tips to streamline the process:
Prepare Your Financial Documentation Early
Gather all necessary financial documents, including tax returns, financial statements, and business plans, well in advance. Having these ready to go will help speed up the application process and prevent delays.
Choose the Right Lender
Selecting an SBA-accredited lender that understands your industry and business needs is essential. Research different lenders and their requirements to find the best fit for your situation.
Maintain Clear and Open Communication
Stay in constant communication with your lender and promptly respond to any requests for additional information or clarification. Clear and transparent communication will help keep the process moving smoothly.
Be Proactive
Take the initiative to address any potential issues or concerns as soon as they arise. Proactively resolving issues can prevent delays and demonstrate your commitment to the loan process.
Stay Organized
Keep all relevant documents and communications organized and easily accessible. This will enable you to quickly provide any necessary information and avoid unnecessary delays.
Follow Up Regularly
Check-in regularly with your lender to inquire about the status of your application. Regular follow-ups can help ensure that your application stays on track and address any potential bottlenecks promptly.
Trust the Process
Lastly, trust in the SBA loan process and the expertise of your lender. By following their guidance and staying proactive, you can expedite the process and secure the financing your business needs to succeed.
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Are SBA Loans Right for You?
Wrapping Up
While SBA loans may be the most attractive loan options out there, it isn’t always the most suitable funding solution for your business. Remember, there are a lot of variables to consider when seeking financing, including how soon you need the funds, whether or not you can afford the monthly repayments, and your credit history.
In general, you should consider SBA loans if:
- You’re not in a hurry to get the funding, and you can wait months for approval. If time is on your side, then waiting out the SBA loan approval will result in your being able to take advantage of the low-interest rates and longer repayment periods.
- You need access to higher loan amounts. Again, SBA loans offer higher loan amounts than conventional loans. This makes them a perfect solution if you’re looking to fund expensive business projects.
- You’re looking for a loan with longer payback periods. With SBA loans, loan repayment can extend as long as 25 years.
- Your personal and business credit score is low, and you have a short track record of your business performance. This usually happens to businesses that are still in the early stages of their operations.
SBA loans are, without a doubt, among the most affordable financing solutions for small businesses. The downside is that the approval process can be long, and you’ll have to submit many documents and paperwork. That said, if you’re planning to apply for one of their loan programs, time should be on your side, and you should be creditworthy.
While the entire SBA application process might seem intimidating, it’s certainly not impossible. If you are approved, you can take advantage of the many benefits these programs can offer your business, such as low-interest rates and longer repayment periods.
However, if you’re looking for quick access cash, you should consider alternatives. Applying through SBA-approved online lenders, like SMB Compass, might be a faster route. We'll guide you throughout the entire loan process and be with you every step of the way.
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