SBA Loan Timeline

How Long Will the Lender Take to Approve Your SBA Loan?

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.

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.

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

1. Collecting and Gathering Documents
2. Application and Underwriting Process
3. Loan Approval
4. Closing

Types of SBA Loans

SBA 7(a) Loan

SBA’s flagship program, the SBA 7(a) loan, is the most popular SBA loan product. With SBA 7(a) loans, you can borrow as much as $5 million, which has a maximum repayment period of 25 years. The loan proceeds can be used for a variety of business initiatives. It includes business space renovations, building acquisitions, buying equipment, inventory, and more.

The flexibility it offers is the reason why business owners highly covet it. However, if you’re planning to apply for an SBA 7(a) loan, you’ll need to be prepared to wait two to three months before you hear anything from the lenders. For a side-by-side comparison of the programs, see SBA loans explained: 7(a) vs 504 vs microloans.

SBA CDC/504 Loan

SBA CDC/504 Loans are primarily intended for the acquisition of assets. If you’re looking to purchase a real estate property like land or building or to purchase heavy equipment or machinery, this could be a viable SBA loan option to apply for.

However, the SBA CDC/504 loan involves dual approval from the CDC and SBA, which means that there are additional variables to consider, including whether or not the project would result in job retention or creation, essentially prolonging the approval process even more.

In general, approval for the SBA CDC/504 loans can take anywhere from one to six months. Plus, once the lender approves the loan, the business may have to wait another 30 to 45 days for the funds to be credited into their accounts.

SBA Microloans

SBA Microloans are designed to help small businesses get access to smaller amounts of business financing. With the SBA Microloan, companies can access up to $50,000 in funding, which can be used as working capital or to buy inventory, equipment, supplies, or fixtures.

Since SBA Microloans offer smaller amounts of funding, the processing and approval of these loans are also typically faster. Approval can take anywhere from one to three months.

SBA Express Loan

An SBA Express Loan is a faster option within the SBA loan program designed for quicker funding for qualified small businesses. Compared to traditional SBA loans, they boast speedier approval times. The SBA itself can provide a response to your application in as little as 36 hours, but that doesn’t necessarily mean final approval from the lender. Additionally, there’s a lower maximum loan amount, typically capped at $500,000, and a generally simpler application process.

Keep in mind that even though the SBA’s response is quick, the total time to receive funding can range from 30 to 90 days after the initial application. This timeframe depends on the lender’s processing speed and your business’s specific situation. Overall, SBA Express Loans are a solid choice for small businesses needing funds quickly and for loan amounts under $500,000 but be prepared for a potential waiting period after the SBA’s initial go-ahead.

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.

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:

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. Before you start, check the SBA loan credit score minimum lenders look for. 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, which SMB Compass can connect you with, might be a faster route. We’ll guide you throughout the entire loan process and be with you every step of the way.

Two things make the wait easier to plan around: knowing what the payment will be at the end of it, and knowing what the credit bar actually is before you start.

• SBA loan calculator — Work out the monthly payment and total interest on a 7(a) at current rates.
• Credit score minimums — What score you realistically need, and what lenders do when you are below it.
• SBA loans — How SBA loans work, program limits and the documents you need.