Your Guide to the SBA Loan Process
If you’re a small business owner in search of financing, odds are that you’re hoping to get approved for a loan sooner rather than later. Many business owners seek out a small business loan because of dwindling cash flow or an urgent need for more working capital.
In most situations, SBA loans are not well suited for business owners who need cash right away. The entire SBA loan process generally takes about 60 to 90 days. Compared to other small business loans and alternative financing products, it can take a while to close on an SBA loan because of the high volume of paperwork and documentation that you need to provide.
Fortunately, there are some things you can do to speed up the SBA loan process. And when you see the process through to completion, the payoff is worthwhile—you’ll end up with a low-interest, long-term loan with manageable payments. Sometimes, just having transparency into the process helps, so we’ll explain the SBA loan process in detail and show you how much longer it really takes compared to other business loans.
Overview of SBA Loans
Before we discuss the SBA loan process, here’s a quick refresher on SBA loans. Unlike other small business loans, SBA loans are linked to the U.S. Small Business Administration (SBA). The SBA’s purpose is to spur the growth of America’s small businesses, and they help business owners get access to capital by backing loans that are issued by lenders across the country.
The SBA guarantees up to 85% of the loan, which lowers the risk that banks take on when working with qualified entrepreneurs.
There are three main kinds of SBA loans for which you can apply, depending on how much money you need and what you plan to do with it:
- SBA 7(a) loans: General purpose loans of up to $5 million, with a 10-year repayment term the most common
- CDC/504 loans: Loans to purchase real estate and equipment, with loan terms as long as 25 years
- SBA microloans: Loans of up to $50,000, with a six-year max repayment period
When applying for an SBA loan, you’ll have to provide your lender with a lot of information about your company, as well as yourself. Only the most qualified candidates typically get approved for SBA loans, so having clear profit and loss statements, a comprehensive business plan, and strong personal credit will go a long way toward obtaining a loan.
SBA Loan Process: What’s Involved?
The SBA loan process can be confusing and difficult to navigate, particularly for first-time borrowers.
Here’s an overview of the SBA loan process and how long each stage takes:
- Borrower gathers documentation, and applies for loan (one to 30 days)
- Lender underwrites the loan (10 to 14 days)
- Lender approves the loan, and sends a commitment letter (10 to 21 days)
- Lender closes on the loan (seven to 14 days)
As you can see, there are a few steps involved from application to closing, and it’s important to be in close communication with your lender throughout the SBA loan process. If there are hiccups along the way, your lender will let you know of the best way to respond.
What’s the Timeline for an SBA Loan?
When you add up the time involved for each step listed above, the SBA loan process generally takes 60 to 90 days, depending on the lender and the size of the loan. Usually, the larger the loan and the longer the term you apply for, the harder a lender will scrutinize your application, which might extend the SBA loan timeline.
Lender experience matters as well. Lenders in the SBA’s Preferred Lender Program have full authority over underwriting and credit checks without SBA review. With less experienced lenders, the SBA takes a more active role, lengthening the process.
The actual SBA loan timeline to approval actually isn’t much longer than that of standard business term loans from a bank. But the most time-consuming part of the process happens before you even apply, and it relies on your ability to pull together all of the material required to submit your SBA loan application successfully.
Initial Steps: Gathering Documentation and Applying for the Loan
After selecting an SBA loan program that’s of interest to you, you’ll need to find a lender who is willing to work with you on the loan. Major banks like Bank of America and Chase are among some of the top SBA lenders.
Fundera has direct relationships with several SBA preferred lenders. If you choose a platform like Fundera, you will have a dedicated loan specialist to help you from start to finish and navigate any bumps in the process.
The first thing that your lender or loan specialist will ask you for is paperwork. Gathering all the required paperwork for your SBA loan package can take weeks, even for a very organized business owner.
Here’s a summary of what you’ll need to provide for an SBA loan application:
- Personal background statement (including previous addresses, names you’ve used, criminal records, educational background, etc.)
- Your resume (and the resumes of any business partners and co-owners you may have)
- Business loan request letter or a business loan proposal
- Use of loan information (how you intend to use the loan—is it to buy equipment? Purchase another company? Buy real estate?)
- Time in business and business size (how old and how large is your company?)
- Personal credit report (both for you and any co-owners/business partners)
- Business credit report (the credit standing of your company, if you’re already in business)
- A business plan (including financial projections as well as qualitative goals for your company)
- The last two to three years of personal and business income tax returns
- The last two to three years of financial statements (P&L statements, balance sheets, and debt schedules if applicable)
- Collateral (if applicable)
- Legal documents (business licenses, articles of incorporation, contracts with suppliers/vendors, franchise agreements, and leases for commercial vehicles or real estate, etc.)
There’s a good chance there will be more paperwork required—this is likely just a start. This is why most business owners take up to a month or more to gather paperwork. A Fundera loan specialist can help walk you through exactly what you need to get ready.
Some of these documents, like credit reports, don’t need to come straight from you. The lender can pull credit reports based on your personal and business information.
Along with submitting paperwork, you’ll need to fill out the basic application forms required by the lender and the SBA. The SBA, for example, requires all 7(a) loan applicants to fill out SBA Form 1919, SBA Form 413, and SBA Form 912.
These forms require detailed financial and legal information and can take a few days to complete. You might need to reach out to your business lawyer or accountant for help. The bank can also clarify what all the questions on the form mean.
Next Steps: Underwriting, Approval, and Commitment
The next stage of the SBA loan process is underwriting. This is what you might find most daunting because the lender will critique every part of your personal financial history and business. The best advice is to be as open as possible with your lender. Answering questions quickly and accurately will help speed up this part of the SBA loan process.
Here are some of the things that the lender will examine during loan underwriting:
- Your personal and business credit history (the bank will do a hard credit pull)
- Your other personal and business debts
- Verifying the value of collateral
- Other lenders you’ve worked with
- Your business’s revenue history and projections
- Any tax or legal issues your business has dealt with
Ultimately, underwriting can take a week or two. The lender wants to make sure that you’ll able to pay off the loan on time and in full. Even though the SBA guarantees a portion of the loan, enforcing the guarantee would be a last resort. The lender still needs to meet strict underwriting standards.
If you pass underwriting, good news—you move to the approval and loan commitment stage. At this point, the lender has found that you pass their credit standards, and they’ve agreed to extend you a loan provided you’re able to provide any remaining documentation.
You can expect to receive a commitment letter within a few weeks outlining the amount of the loan, interest rate, any collateral provided, and other terms. Carefully review and sign the letter to accept the loan offer.
Last Step: SBA Loan Closing
The final step in the journey to your SBA loan is closing. The bank will make sure everything is ready to go and all documents are signed. There might be some last few documents that the bank needs to review, such as title and environmental reports. The lender will also do a lien search to verify other companies that have extended money to you.
The SBA will assign a file number to the loan and authorize the government guarantee. Closing generally takes one to two weeks. Finally, the funds will be wired or transferred to your business bank account. You can use the funds immediately for eligible business purposes.
Speed up the Process With an SBA Express Loan
Even when the SBA loan sounds ideal, the SBA loan process can be very long. There’s where the SBA Express loan comes in. You can sort of think of it as the little sibling to the SBA 7(a) loan.
You can use the Express loan just like a regular SBA 7(a) loan, but the application process is faster. The Express loan is only backed by a 50% guarantee by the SBA (versus 85%)—which means you’ll need to provide fewer documents and less paperwork. And that could shave off two to three weeks from the SBA loan timeline.
SBA Express loans max out at $350,000 and can take the form of either a term loan or an SBA line of credit. They’re more expensive than standard SBA loans because the guarantee isn’t as high, so the lender will offer less ideal terms.
The SBA Loan Process vs. Other Business Loans
If waiting 60 to 90 days isn’t in the cards for you, take a look at how the SBA loan timeline compares to other types of small business financing.
Although SBA loans generally offer the best terms out there, you might find there’s another option worth considering, depending on your specific needs and plans.
- As little as a day to get your application paperwork in order
- One to two business days for loan approval
- Five to 10 business days to get your cash in hand
- As little as a day to get your application paperwork in order
- Three to five business days for loan approval
- The fastest business lines of credit will get you approved and get you financing within 24 hours
SBA 504/CDC Loan Process vs. Equipment Financing Timeline
If you’re looking to finance a fixed asset with an SBA 504/CDC loan, but you want to do it faster than the SBA loan timeline allows, l0ok into equipment financing. Working with a lender to get financing specifically for equipment allows you to work faster and with less paperwork—in some instances, all you need to get the process going is a quote for the equipment you want to finance.
A sample timeline could be:
And equipment financing is easier to qualify for than an SBA loan—since the loan is self-secured (meaning that the equipment itself provides a lender collateral in case of default).
SBA 7(a) Loan Process vs. Alternative Lender Term Loan Timeline
If you’re looking to get your hands on a sizable lump sum loan, but would like to get it faster, look into a business term loan through an online lender.
A sample timeline might be:
Some alternative lenders even provide same-day business loans. Alternative lenders do still look for good credit scores (600+) and time-in-business (about a year) but offer flexibility that could work to your advantage.
SBA Loan Process vs. Business Line of Credit
More SBA loans are issued as term loans, but you might also be considering applying for an SBA line of credit, too. Or, even if you haven’t looked at a business line of credit, you might want to—especially if you want flexibility with how you can use your financing.
Business lines of credit from online lenders are some of the fastest ways you can get business financing in hand, and also have some of the lowest barriers for qualification.
Plus, with a business line of credit, these flexible “revolving” lines of credit work like business credit cards, in which credit will become available again once you pay off your balance.
Benefits of Waiting for an SBA Loan
There are lots of advantages of SBA loans. But key among the reasons you’d want to go through the process of applying for an SBA loan over other kinds of small business financing? Their generous terms and low interest rates for small business owners with a good credit history.
For example, the most creditworthy borrowers can qualify for as much as $5 million of financing and repay it over the course of seven to 10 years. You’re not going to see many non-SBA loan terms that allow you that much financing and that long of a term to pay back your debt, regardless of your credit history.
Plus, as we mentioned before, another reason why SBA loans are so great is because of their interest rates. Your average SBA loan rate is anywhere from 6% to 7% over the course of seven, 10, or 25 years, whereas a non-SBA loan interest rate hovers around 7% to 10%.
Banks are able to offer low rates because these loans come with a guarantee from the U.S. government in case of default. Since the SBA acts as a guarantor on these loans, banks can invest with more confidence and less risk. This lowered risk means that the bank will charge you a little less to borrow its money as a sign of its confidence in your ability to repay.
Should You Take an SBA Loan or Another Loan?
As great as SBA loans can be for plenty of small business owners, they may not always be the perfect solution for you or your business. In some cases, other types of small business loans (or even alternative financing sources) are a better fit, based on your needs or financial situation.
For example, if you’re in a rush to get your loan approved and have cash hit your checking account, an SBA loan timeline might be too long, since the paperwork could take too long to prepare. Or maybe you have a credit rating below 660, and your prospects of SBA loan approval are slim.
Here’s when you should play the waiting game versus moving on to other options:
Wait Out the SBA Loan Timeline When…
- You need a substantial loan: SBA loans can go into the multi-millions, so sit tight if you need access to large sums of money.
- Time’s on your side: If you don’t truly need the money right away, you’re better off going through the SBA process and getting a lower interest rate.
- You need a longer payback period: SBA loans offer some of the longest terms in the game, which means you get more time to pay back what you owe.
But if none of these apply to you, and you need cash-in-hand soon, consider the alternatives.
Apply for Another Type of Small Business Loan When…
- You need money ASAP: SBA loans have low interest rates, but can take months to close. Consider an alternative funding option if you need money quickly.
- Your credit might be an issue: If you’re not looking at a 650+ personal credit score, you should consider focusing your efforts elsewhere.
- If you need a loan for specific purpose: If you need a loan for invoice financing or another specific purpose that won’t warrant all of the steps of going through the SBA process.
Frequently Asked Questions
The Bottom Line
The SBA loan process can take two to three months to come together. It starts with gathering documentation. You’ll need to budget time to gather your paperwork before you even submit an application for an SBA loan.
Even if the sheer volume of information you’re required to provide for the application sounds daunting, it’s worth it in the end. You’re putting your effort toward getting the best possible small business loan on the market. Consider the amount of work you’re putting in, and the time it takes to do it, well spent.
That said, if you don’t want to wait out the full SBA loan timeline, there are much faster alternatives. Many business owners who are eligible for SBA loans prioritize speed and end up opting for a different loan product. It ultimately comes down to what you want to accomplish with your business loan.
Meredith Turits is a contributing writer for Fundera.
Meredith has worked as a writer and editor for more than a decade. Drawing on her background in small business and startups, she writes on lending, business finance, and entrepreneurship for Fundera. Her writing has also appeared in the New Republic, BBC, Time Inc, The Paris Review Daily, JPMorgan Chase, and more.