Nobody likes to wait for news, especially when it is regarding something as important as a loan. Sometimes, small businesses haven’t got the time to wait. This is why one of the main questions before someone takes out a loan is, “How long will the approval process be?”
The longer it takes, the more doubt starts to creep in and the harder it becomes to sustain or even start a business.
Before you even get a business off its feet, you need to know whether you have been successful or not in obtaining funds. Some loans take longer than others and circumstances can often have an impact on the loan approval time.
SBA 7(a) approval times are generally relatively short. This means borrowers can usually move forward quite quickly, either way.
In today’s article, we are going to guide you through the process of waiting to hear if your loan has been approved or not. We will discuss how different factors can determine the length of this time and whether your circumstances could see you wait longer than usual.
SBA 7(a) Loan Approval Time
It can take some time for an SBA 7(a) loan to move through approval. In general, this time frame is around 60 to 90 days. If your lender is an SBA preferred lender, then they can have the authority to approve your loan in a much shorter amount of time compared to a non-preferred lender.
The length of this process typically depends on the individual lender. If time is of the essence, then we highly recommend working with a lender that has handled SBA loans in the past. They will know the process far better than a lender who is new to the game of SBA 7(a) loans.
From the moment you apply for an SBA 7(a) loan to the end, the process can take weeks. During this time, you must prepare the necessary paperwork and documents to help the approval time go as quickly as possible.
You must also meet with the bank, prepare even more documents, wait for underwriting, and wait for closing. While this can be a frustrating time, there is usually no way of shortening the process.
If you meet with your lender with all of your documents in order, the process should, and usually does, go a lot faster.
Some of the most common documentation you require when visiting your lender include:
- Your bank account statements
- Your IRA, 401(k), as well as other retirement account statements
- Investment documents that show a current value
- Your life insurance documents that show a current cash value
- Pay stubs
- Loan statements such as credit cards, mortgages, and auto loans
- Statements for any other income such as pensions
In certain circumstances, you may also require further documentation. Some of these can be found here.
SBA Express Loan Program
If the average approval waiting time of 60 to 90 days is too long for you, there are other options to look at. One is the SBA Express Loan Program. These allow you significantly cut down the turnaround times when awaiting approval from a lender.
Because these express loans have such a quick processing time, the maximum loan amount is usually lower than a standard SBA 7(a) loan. However, within just 36 hours, you could have an SBA Express Loan worth up to $350,000.
These express loans have a faster turnaround time because the SBA gives its Express lenders the authority to make credit decisions without having SBA review first. While this doesn’t mean a free-for-all, it certainly means a lot less hassle when trying to strike a deal. The less hassle, the lower the approval waiting time.
If you apply and are approved for an SBA Express Loan, you actually increase the chances that you will get approved for funding by other lenders, especially with more traditional loans.
To be eligible for an SBA Express Loan, there are some requirements:
- Must have a for-profit business
- You must have already invested in your own equity
- You must operate within the U.S.
- Your business needs to fit the SBA’s definition of a small business
Other questions that determine your success with an Express loan are:
- Are you up to date with payments on your government debts?
- Have you tried to get funding from other sources before applying for this loan?
- Is it possible for you to show that you have been unable to secure enough credit elsewhere?
- Can you prove that you are able to repay your loan?
- Are you of good character?
- Do you have a practical business plan to provide?
- Do you have high business or personal credit scores?
- Do you have relevant management experience within your business industry?
The answers to these questions will determine your success, not only with Express loans but also all SBA 7(a) loans.
SBA 7(a) Approval Times for Various Programs
If you qualify for the amount you want to borrow, the approval time can depend on the amount of experience your lender has when processing this type of financing. If appraisals or reports are required to support your loan application, this could significantly lengthen the time.
If you choose a lender carefully, you should be able to get your application processed more quickly. SBA 7(a) loans can be processed in different ways.
A standard 7(a) loan can take 7 to 10 days to process. This is when a lender submits a complete application package and requests an SBA guarantee.
A certified lender’s program tends to take around 3 business days to process. This is if a lender has experience when dealing with borrowers under SBA loans.
A preferred lenders program can only take 24 hours to process. These are the most experienced SBA lenders as they have the authority to process and close loans themselves. These lenders usually submit a checklist to the SBA and confirm that they have made the appropriate inquiries about the borrower.
Times vary for SBA 7(a) loans but with the right documents and preparation, you could significantly cut the approval time.