An SBA loan is a business loan provided through the U.S. Small Business Administration. This federal organization exists to support small business owners in running successful businesses. SBA loans provide entrepreneurs with a low-cost business loan option guaranteed by the government. Generally, receiving funds following an application takes 30 to 90 days.
SBA loan approval time differs depending on the lender you use and the type of loan you apply for. These loans are administered by local lenders who participate in SBA loan programs. SBA loan types include 7(a) loans, 504 loans and microloans.
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SBA loan approval process
When you apply for an SBA loan, the process and requirements differ by lender and loan type. However, there are some common steps to the process. Here is what you can expect:
Gather the necessary documents and information. Before you talk to a lender, make sure you have all the info they need to provide you with loan options. Prepare to provide a business plan, a dollar amount and what you will use the funds for, your credit history, financial projections, any collateral you have and evidence of your experience in the industry.
Find a lender. Each loan type has a different type of lender. For example, non-profit and community organizations often administer microloans, while banks handle 7(a) loans. Research the loan type you need and lenders in your community. You can use the lender match tool on the SBA website to find lenders and compare their loan offerings.
Apply using the lender’s application process. Each lender will have its own application process. Use their website or visit in person to fill out an application for an SBA loan through your chosen lender. Then, keep communication open with your lender to find out any additional information you may need to provide throughout the process.
Wait for approval. Approval times vary by loan type and lender. You can expect to wait anywhere from 36 hours to 90 days, depending on the loan type, to find out if you are approved.
Receive your funds. Once approved, you may have to wait to receive the funds. Each lender takes a different amount of time to disburse the funds for a loan. Your lender can provide you with an accurate timeline for when you will receive your money once the loan is approved.
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How long does each loan type take?
Each type of SBA loan may have a different timeline for approval. Here’s what you can expect for each loan type:
SBA 7(a) loan: The nine 7(a) loan subtypes are backed directly by the SBA. Expect to wait between two and three months for loan approval. The exception is an SBA Express loan. With this type of 7(a) loan, you should hear back about your application within 36 hours. Receiving your funds after approval may take several weeks.
SBA Microloan: Microloans are loans for smaller amounts of $50,000 or less, and they generally have a quicker turnaround time than 7(a) loans. Approval for this type of loan usually comes within 30 to 90 days.
SBA 504/CDC loan: This type of loan is backed by the SBA and funded through certified development companies (CDCs). It typically takes 30 to 45 days to receive SBA approval. However, the entire funding process may take up to 6 months because the CDC must also approve.
How to speed up SBA loan processing time
Work with an SBA Preferred Lender. Preferred Lenders are allowed by the SBA to make final credit decisions, and they have a proven track record with SBA loans. Working with an experienced lender can eliminate the speed bumps you may encounter with other lenders.
Use updated financials. Providing at least three years of current financial statements and tax returns can make the process go quicker. If you don’t provide this, your lender may need to ask you for additional documentation, which can slow the process.
Build a relationship with the lender. You will likely have questions and need help as you apply for an SBA loan. Find a contact at the lending institution and reach out regularly to ensure you are doing everything correctly throughout the process.
Consider an SBA Express Loan. If the timeline for a typical SBA loan is too long for your business needs, you might be able to apply for an SBA Express Loan. These loans have a much quicker approval time of 36 hours or less.
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SBA loans vs. other small business loans
SBA loans aren’t the only option for business loans. You may also be able to apply for a conventional business loan through a traditional lender.
Banks may require more financial history for your business than an SBA loan, so their loans are best for established businesses. Online lenders, such as financial service companies, often have more lenient requirements.
Another difference between these loan types is that conventional loans usually get funded faster than SBA loans. Conventional loans are funded based on a bank’s underwriting criteria, so less paperwork is involved, and the process is quicker. If your business is already established and you need fast funds, you may find better options through a conventional loan.
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The bottom line
SBA loans can be a great option if you have a new business and need financial assistance, but approval takes time. While timelines vary for different SBA loan types, you typically can get faster funding through conventional business loans. Research business loan types before deciding which to apply for.
