For small business owners, Small Business Administration (SBA) loans are some of the most sought after business loans on the market. These government-backed small business loans come with generous terms, affordable rates, and resources to help small business owners grow.
However, one major downside to SBA loans is the application process–it isn’t exactly quick. If you’re thinking about applying for an SBA loan, expect the application process to take anywhere from 1 to 3 months from the time you begin exploring lenders to the time when the funds show up in your bank account.
SBA 7(a) Loans: 60 to 90 Days
Here’s a guide to each step you’ll have to complete along the way to getting an SBA 7(a) loan, the most popular loan in the SBA program, and how long each step takes.
Getting Matched With a Lender: 2 Days
While the government guarantees a portion of SBA loans, they don’t actually administer them. Instead, SBA loans are given out by the same lenders you’d go to for regular business loans. This separation means that the first step in the application process is to get matched with a lender who meets your needs.
You can do this through the US Small Business Administration’s lender match tool. This step is relatively simple and requires you to fill out a brief questionnaire, but it can take a couple of days to find a match.
Gathering Documentation and Applying for the Loan: Up to 30 Days
This step is the lengthiest portion of the application process and the most difficult part for you, the business owner. SBA loans require fairly extensive documentation and paperwork. Here are just some of the items that may be required from the SBA loan submission checklist:
- Business licenses
- A detailed list of all debts
- Current income statement
- Federal income tax returns from the past 3 years
- Business tax returns from the past 3 years
- Cash flow projection
- Real estate appraisals (collateral)
- Lease agreements (collateral)
- Franchise, asset purchase, real estate purchase, or other purchase agreements depending on what you plan to do with the loan
Depending on your purpose for the SBA loan and your business’s record-keeping habits, this step can take anywhere from a couple of days to an entire month.
Waiting for a Loan Decision: 1 to 3 Weeks
Once you’ve submitted your application, it can take several weeks for a lender to go through all of your documents and underwrite your loan. You might not receive a decision for a few weeks.
Receiving Your Loan Funds: 1 to 2 Weeks
Even after you’ve received approval for an SBA loan, you’ll be required to complete some additional paperwork to finalize the loan. This step, plus the time it takes for the lender to process this paperwork and send your money, can take anywhere from 1 to 2 weeks.
SBA Express Loans: 30 to 60 days
You also have the option to apply for an SBA Express loan, which has a significantly faster application process than a standard SBA 7(a) loan. With SBA Express, once you complete your application, you can expect to hear back from the SBA within 36 hours. From start to funding, this whole process can take as little as 30 days.
However, while standard SBA 7(a) loans are guaranteed up to 85% and come in amounts of up to $5 million, the SBA Express loans are only guaranteed up to 50% and come in smaller amounts of up to $350,000.
The most important factors to consider when looking for a small business loan are the terms and the cost of the loan, and SBA loans tend to be generous in both areas. Don’t let a lengthy application process deter you. However, if you need funds in a hurry, SBA loans might not be right for you.