SBA Loan Processing Time: How Long Does the Process Take?
Since it takes anywhere from 60 to 90 days to receive SBA loans, they aren’t a good option if you require immediate cash. However, if you have time to wait for a final approval, an SBA loan could be a viable funding option.
How Does The SBA Loan Process Work?
As a first time SBA loan applicant, you may find the application process to be fairly complicated. The good news is that there are many resources available for applicants.
Before you apply for any SBA loan, it’s in your best interest to understand how the loan process works:
Step 1: You’ll collect the appropriate documents and submit your SBA loan application. This part of the process can take anywhere from one to 30 days.
Step 2: The loan officer will review your application and underwrite the loan within 10 to 14 days.
Step 3: The lender will hopefully approve your loan and send you a commitment letter. You can expect this step to take between 10 to 21 days.
Step 4: In the final step, the SBA lender will close on the loan in about seven to 14 days.
Rest assured, the lender will communicate with you throughout the process and inform you of any hurdles that may cause delays.
What Determines the SBA Loan Timeline?
As stated, the SBA loan approval process from application to loan closing is about 60 to 90 days. However, this time frame isn’t set in stone, as there are numerous factors that can affect the SBA loan timeline.
The type of loan program you apply for and the amount of money you wish to receive will be considered. If you apply for a large loan with a long term, you can expect the process to take longer than someone who opts for a smaller loan with a shorter term.
Also, the lender you use will make a difference in how long it takes. While all SBA lenders in the Preferred Lender Program have the right to underwrite and perform credit checks on SBA loans, they’re not all the same. Some are less experienced and require SBA intervention, prolonging the approval process.
How Does COVID-19 Affect Loan Processing Time?
The COVID-19 pandemic has led to more small business owners applying for SBA loans. Due to the influx of applications, the SBA may take longer than usual to approve you for a loan.
If you applied for the SBA’s Paycheck Protection Program (PPP) loan, note that you can still apply for other SBA disaster loans. The only caveat is that you can’t use both loans for the same business purpose.
Why Wait to Get Approved for an SBA Loan?
While an SBA loan can take some time, it’s often worthwhile because of the many benefits it offers. Several of the most noteworthy perks of SBA loans include:
- Low Interest Rate: If you’re eligible for an SBA loan, you’re likely lock down a low interest rate that you may not find elsewhere. Of course, your creditworthiness will determine your interest rate but you may be able to secure a rate as low as 6.75%.
- Longer Repayment Terms: Depending on the SBA loan you apply for, you can expect longer repayment terms than other small business loans and a payment schedule that aligns with your business plans.
- Low Down Payments: Most business loans require high down payments that may go up to 30%. With an SBA loan, you may be able to put as little as 10% to 20% down. If you’re short on cash flow, this is a huge benefit for your business.
- Flexibility: While some business loans will only allow you to use the money to cover equipment or invoices, SBA loans tend to be quite flexible. For example, with an SBA 7(a) loan, you’re free to use the funds for just about any business purpose.
- SBA Resource Access: The SBA has no shortage of resources for business owners. As an SBA borrower, you may receive access to organizations like SCORE, which open the doors to networking events, mentorship programs, and training opportunities.
When to Explore Other Financing Opportunities
In some instances, it makes more sense to research and apply for other small business loan options. If you can’t wait for months to get approved for an SBA loan, alternative funding is probably your best bet.
In addition, if you don’t have strong personal and business credit scores, you may not get approved for an SBA loan.
If this is the case, you should search for loans with more lenient credit history requirements. In addition, if you intend to use your funds for a specific purpose like buying equipment, a more specific loan may be the way to go.
Conclusion: Are SBA Loans Worth the Wait?
Due to the significant advantages you can enjoy with an SBA loan, it’s a great funding option. However, due to its longer timeline, if you’re in need immediate access to business financing, alternative funding may be a better route.
Editor’s Note: This post was updated for accuracy and comprehensiveness in January 2022.
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.