How Long Are Sba Loans

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The U. S. The Small Business Administration (SBA) assists business owners in obtaining the funding they require to launch, grow, and succeed their enterprises. Compared to some traditional loans, these loans are frequently simpler to qualify for. SBA loan approval and funding, however, can take much longer than most loans—typically between 60 and 90 days. Because of this, SBA loans aren’t the best option for business owners who require quick cash.

The following information on SBA loan approval times and how they compare to those of other business financing options is important to know.

Overview of SBA Loans

The SBA doesn’t lend money directly to small business owners. Instead, depending on the loan program and amount, the SBA guarantees up to 85% of the loan amount. As a result, lending money to applicants is less risky, and SBA-approved lenders are more likely to work with small business applicants they might not have otherwise accepted. Having said that, there are various SBA loan programs, each with particular eligibility standards and conditions:

SBA 7(a) loans: The SBA 7(a) program offers several types of loans up to $5 million available for various business purposes. Standard 7(a) loans and small 7(a) loans come with SBA turnaround times between five and 10 business days, but the process takes longer.

SBA Express loans: SBA Express loans are available for up to $500,000, with repayment terms of up to 25 years for real estate and five to 10 years for other loan types. Express loans fall under the 7(a) umbrella; however, the program offers accelerated approval times. Individual lenders make eligibility decisions, but the SBA turnaround time is just 36 hours.

Certified Development Company (CDC)/504 loans: CDC/504 loans can be used to purchase equipment and real estate. Loans are available for up to $5 million, with 10- and 20-year repayment terms.

SBA microloans: Microloans max out at $50,000, though the average microloan is just $13,000. The minimum repayment term is six years, and interest rates range from 8% to 13%.

Despite the lengthy application process, SBA loans may be easier to qualify for than other forms of business financing. A business plan, copies of your personal and business tax returns, business balance sheets, profit and loss statements, and a list of your current business debts are all required.

How to Get Approved for an SBA Loan

From application to funding, the SBA loan approval process takes 30 to 90 days. However, this time frame varies by lender and loan type. Although the precise steps for obtaining an SBA loan can vary from lender to lender, there are a few standard stages:

Loan application. The SBA loan application process is more demanding than traditional lenders, and prospective borrowers must submit extensive supporting documents. For this reason, application preparation can take as long as 30 days. However, you can complete an application more quickly if you have already gathered the necessary documentation.

Application review and underwriting. After an application is submitted, the lender will review your credit score and financials. This process typically takes between 10 and 14 days, including the underwriting process, but can take longer for lenders that aren’t in the SBA’s Preferred Lenders Program. Likewise, if collateral is required, the lender may order an appraisal during the underwriting process. Based on this review, the lender determines the loan amount and interest rate you qualify for.

Loan agreement. Following approval, it typically takes 10 to 21 days for the lender to prepare the loan agreement and commitment letter. During this time, you should review the loan agreement to ensure that all terms are acceptable.

Closing and funding. Closing and funding generally occur seven to 14 days after finalizing the loan amount, repayment term and interest rate in the commitment letter. If the lender contacts you with questions or additional requests during this period, respond quickly to keep the process moving.

How Will I Know If My SBA Loan Is Approved?

The SBA will email you the loan details if your loan is approved. If you haven’t received an email and want to find out the status of your application, get in touch with the SBA directly. You might also be able to check the status of your application online or by getting in touch with your loan officer, depending on your lender.

How Long Does It Take to Get SBA Loan Funds After an Approval?

It typically takes the lender five days to disburse loan funds after an SBA loan is approved, but it may take up to 14 days. However, the actual time it takes for you to receive loan funds will vary depending on the lender and the bank of the business.

SBA Loan Process vs. Other Business Loans

The lengthy SBA loan approval process does not meet the borrowing requirements of all small business owners. Other business loans may be able to provide funds more quickly and occasionally with less onerous application criteria. Comparing the SBA loan application process to some other popular financing choices is as follows:

Business lines of credit. A business line of credit lets you draw on funds as needed and only pay interest on the amount borrowed. Approval times are shorter than for an SBA loan, with funds sometimes available in as few as 24 hours after submitting an application. Business lines of credit generally have lower borrowing limits than SBA loans, but they’re revolving so you can access the money again after the balance is paid off.

Online loans. Several online lenders offer business loans with quick approval times—sometimes as soon as the same day. These lenders often work with businesses that may not qualify for financing from a traditional bank. However, online loans tend to have higher interest rates and shorter repayment terms than SBA loans.

Equipment financing. Equipment financing is a type of business loan business owners can use to purchase equipment or machinery. These loans typically have shorter repayment terms than SBA loans and may also have higher interest rates. Financing may be available in just 24 hours or take up to several weeks.

Alternative loans. Alternative loans are another type of financing that can have quick approval times, some with same-day approval. These loans are available from many online lenders and are used for a variety of purposes, including working capital, equipment financing and expansion. However, alternative loans also tend to have higher interest rates than SBA loans.

Personal loans. Getting a personal loan can be much faster than getting an SBA loan, as the application process is generally more straightforward and approval times are shorter. However, personal loans typically have shorter repayment terms and higher interest rates than SBA loans. Plus, some lenders restrict the use of personal loans for business purposes.

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A small business owner with experience in real estate and financing, Kiah Treece is a licensed attorney. Her primary goal is to help people and business owners take control of their finances by demystifying debt. The Forbes Advisor editorial team is independent and objective. We receive money from the businesses that advertise on the Forbes Advisor website to help fund our reporting efforts and to keep providing this content without charge to our readers. This compensation comes from two main sources.

FAQ

Does SBA loan have to be paid back?

Key Takeaways. Small businesses can grow their operations with SBA loans for long- or short-term capital, asset purchases, or startup costs. Small businesses are required to repay loans from SBA partner lenders that they receive.

How long is an SBA disaster loan?

Depending on ability to repay and SBA policy, the maximum loan term is 30 years. There are no prepayment penalties.

What is the minimum loan amount for SBA?

An SBA 7(a) loan for your company is available for any sum up to $5 million. It’s good news for small businesses that the loan has no minimum requirement.

How long does it take to get SBA loan once approved?

For its express loans, the SBA promises a turnaround time of 36 hours. But that does not account for the time needed for the lender to approve the loan, which may add a few more weeks to the process. So, after everything is said and done, you can expect the SBA loan processing time to take 30 to 60 days rather than 60 to 90 days.