Wondering How Your SBA Loan Application Gets Underwritten?

Sarita Harbour

Sarita Harbour

Sarita Harbour is a Small Business & Entrepreneurship Columnist at Fundera and a freelance writer and entrepreneur specializing in business and personal finance. A former financial advisor, Sarita has over a decade of experience in banking. Her work appears online at sites such as Forbes, Investopedia, Yahoo!, Capital One Spark Business IQ, and Business News Daily. Connect with Sarita on Twitter @saritawrites.
Sarita Harbour

Note: This article is the second in a three-part series on the popular alternative business lender, SmartBiz. If you missed it, you can read the first piece in the series, A Smart & Easy Way to Get an SBA Loan, here.

If you’re a business owner looking for an SBA loan between $30,000 and $350,000 at a low rate, a SmartBiz loan might be a smart option—as we discussed in the previous part of this series. And once you’ve completed the online application process, your loan will go to underwriting. 

What is Underwriting?

Underwriting is the second of three steps—application, underwriting, and funding—that go into getting a SmartBiz loan. Since these are SBA loans, the underwriting process helps determine that borrowers satisfy not only SmartBiz’s requirements, but also the SBA underwriting process requirements of the lender. But because SmartBiz isn’t a direct lender, underwriting works a little differently than it would with a traditional lender.

“SmartBiz bank partners license SmartBiz technology to help them underwrite in an automated method, enabling decisions to be made quickly,” says Judy Balint, CMO at SmartBiz, explaining that additional underwriting isn’t required.  “Overall, the combination of bank software, online marketplace, and online packaging lets SmartBiz make getting SBA loans easy.”

During the underwriting stage, a borrower’s ability to successfully make payments and pay back a loan in full with interest gets assessed.  Balint says that at the same time, SmartBiz software looks at a loan application and automatically matches up the business loan application with its most suitable lender—in other words, determining that an application might be a good fit for a certain lender. 

“This is a critical part of our unique marketplace,” says Balint: “Our software automatically sends the right loan to the right bank, driving up approval rates.  We hear from borrowers all the time that their bank said ‘no’ to them, while SmartBiz said ‘yes’.”

In essence, underwriting is a risk assessment. During this stage, underwriters look at things like your personal and business tax returns, financial statements for your business, and bank and credit records. To keep up-to-date on all stages of your loan application, including underwriting, talk to your SmartBiz relationship manager.

A specific Relationship Manager (RM) located here in San Francisco gets assigned to each small business customer,” says Balint. “Our RMs provide ‘concierge service’ to walk each business through our streamlined online application process.”

How Long Does Underwriting Take?

Underwriting a SmartBiz loan is relatively fast compared to many other SBA lenders.

“Underwriting begins after the borrower has pre-qualified,” says Balint. The length of the process depends on how quickly the borrower submits their required documentation. “SmartBiz usually returns a cash flow decision to the customer within 1-2 business days of receiving all the information needed,” she says.

Occasionally, borrowers might have to provide more information after the underwriters start to review the application.

“Each application is unique, so there may be times that a borrower needs to provide additional documentation,” says Balint. “This is determined on a case-by-case basis.”

Your Personal and Business Tax Returns Are Key

If you’re serious about applying for a SmartBiz loan and getting it approved quickly, make sure you have your personal and business tax returns on-hand.

“During the application process, the borrower is requested to provided business and personal tax returns for the last two years, and to complete the online application,” says Balint. Doing so makes the underwriting process much smoother. “Once SmartBiz has this data, we can underwrite the loan with little to no further follow-up 90% of the time.”

What Underwriters Want

Once you’ve completed your pre-qualification information and submitted the required business documentation, the SmartBiz underwriting team carefully reviews your loan application to make sure your business meets the SBA and SmartBiz requirements. But what exactly are they looking for?

“Small business we work with typically have $50,000 to $5 million in annual revenue, with 1 to 40 employees,” says Balint, adding that most are profitable, cash flow positive, and show that they can afford their monthly loan payments. “The basic requirements include a minimum of 2 years in business, a U.S. based business owned by U.S. citizen or Lawful Permanent Resident who is at least 18 years old, and a good personal credit score,” she says.

Balint also says that borrowers can’t have outstanding tax liens, bankruptcies, or foreclosures in the past 3 years. They also can’t have recent charge-offs or settlements, or a criminal record other than minor vehicle violations. Borrowers must also be current on government-related loans.

The SmartBiz SBA Marketplace

As an alternative online business lender, SmartBiz capitalizes on technology during underwriting with its automated systems—leading to more business loan approvals and faster funding.

“The SmartBiz SBA marketplace improves approval rates for borrowers by automatically directing applications to the right lender, while its advanced software streamlines the SBA loan application and origination process making approval and funding fast and easy,” says Balint. SmartBiz’s systems let busy small business owners apply online at any time, get pre-qualified in minutes, and get access to funds in as few as 7 days after their application is complete.

Your Credit Score Matters

Unlike with some other online business lenders, your credit score does matter to SmartBiz—but it won’t come into play until the funding stage.

“A borrower can pre-qualify for a SmartBiz loan without impacting their credit score!” says Balint.  In order to determine if a business is pre-qualified, SmartBiz takes a “soft pull” of a borrower’s credit score—so it won’t actually impact your credit score. And if your business doesn’t qualify for a SmartBiz loan, you won’t have an unnecessary hit on your credit report.

“When the loan application proceeds to funding, SmartBiz and its lenders request a hard pull on the borrower’s credit, which will show up as an inquiry on their credit report,” Balint explains. “This only happens after their application gets to the funding process and matches with a lender who’s highly likely to fund their loan.”

Underwriting might be the most important step in getting a SmartBiz SBA loan, but it depends on the information you provide during the application stage. Check your information carefully to make sure there are zero input errors when applying online, and be sure to provide a current phone number in case a Relationship Manager needs to reach you.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Sarita Harbour

Sarita Harbour

Sarita Harbour is a Small Business & Entrepreneurship Columnist at Fundera and a freelance writer and entrepreneur specializing in business and personal finance. A former financial advisor, Sarita has over a decade of experience in banking. Her work appears online at sites such as Forbes, Investopedia, Yahoo!, Capital One Spark Business IQ, and Business News Daily. Connect with Sarita on Twitter @saritawrites.
Sarita Harbour

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