How Long Do You Have to Wait for SBA Loan Approval? – Forbes Advisor
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The US Small Business Administration (SBA) helps business owners access the funds they need to get their business off the ground, expand and thrive. These loans are often easier to qualify for than some traditional loans. Still, SBA loan approval and funding can take much longer than most loans — often anywhere from 60 to 90 days. Because of this, SBA loans are not the right choice for business owners who need cash fast.
Here’s what you need to know about SBA loan approval times and how they compare to other business financing options.
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Overview of SBA Loans
The SBA does not lend money directly to small business owners. Instead, the SBA guarantees up to 85% of the loan amount, depending on the loan program and amount. This reduces the risk of lending money to applicants and encourages SBA-approved lenders to work with small business applicants that they might not otherwise approve. However, there are several SBA loan programs, each with unique eligibility requirements and conditions:
- SBA 7(a) loans: The SBA 7(a) program offers various types of loans up to $5 million for various business purposes. Standard 7(a) loans and small 7(a) loans have SBA processing times of 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 credit falls under the umbrella of 7(a); However, the program offers expedited approval times. Individual lenders make eligibility decisions, but the SBA processing time is only 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 top out at $50,000, although the average microloan is only $13,000. The minimum term is six years, the interest rates are between 8% and 13%.
While SBA loans are easier to qualify for than other types of business financing, the application process is extensive. You must provide comprehensive documentation, including a business plan, copies of business and personal tax returns, balance sheets, income statements, and a list of current business debts.
How to Get Approval for an SBA Loan
The SBA loan approval process takes 30 to 90 days from application to funding. However, this timeframe varies by lender and loan type. The exact steps to obtaining an SBA loan can also differ from lender to lender, but there are some general steps in the approval process:
- credit application. The SBA loan application process is more demanding than traditional lenders, and prospective borrowers are required to submit extensive supporting documentation. For this reason, the preparation of the application can take up to 30 days. However, you can complete an application more quickly if you have already collected the necessary documents.
- Application review and underwriting. After an application is submitted, the lender will review your credit history and finances. This process typically takes between 10 and 14 days, including the underwriting process, but may take longer for lenders who are not in the SBA’s Preferred Lenders Program. Likewise, if collateral is required, the lender may request an appraisal during the underwriting process. Based on this review, the lender determines the loan amount and interest rate that you qualify for.
- Credit Agreement. Once approved, it typically takes 10 to 21 days for the lender to draw up the loan agreement and letter of commitment. During this time, you should review the loan agreement to ensure all terms are acceptable.
- completion and funding. Closing and financing usually take place seven to 14 days after the loan amount, repayment period and interest rate are finally specified in the commitment. If the lender contacts you with questions or additional requests during this period, respond quickly to keep the process moving.
How do I know if my SBA loan has been approved?
If your loan is approved, the SBA will email you the loan details. Contact the SBA directly if you did not receive an email and would like to check your application status. Depending on your lender, you may also be able to check your application status online or contact your loan officer.
How long does it take to get SBA loan funds after an approval?
After an SBA loan is approved, it typically takes the lender about five days to pay off the loan funds — but it can take up to 14 days. However, how long it actually takes before you receive the loan proceeds depends on the lender and the company’s bank.
SBA loan process compared to other business loans
Lengthy SBA loan approval times don’t match the credit needs of all small business owners. Other business loans can provide funds faster and sometimes with less stringent application requirements. Here is how the SBA loan process compares to some other popular financing options:
- Business Credit Lines. With a business loan, you can access funds as you need them and only pay interest on the amount borrowed. Approval times are faster than an SBA loan, with funds sometimes available in as little as 24 hours after an application is submitted. Business lines of credit generally have lower credit limits than SBA loans, but they are revolving, so you can access the money again after the balance is paid off.
- online loan. Several online lenders offer business loans with short approval times – sometimes even on 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 finance is a type of business loan that business owners can use to buy equipment or machines. These loans typically have shorter repayment terms than SBA loans and may also have higher interest rates. Funding can be available in as little as 24 hours or take up to several weeks.
- Alternative Loans. Alternative loans are another type of financing that can have short 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 quicker than an SBA loan because the application process is generally less complicated and approval times are faster. However, personal loans typically have shorter repayment periods and higher interest rates than SBA loans. Also, some lenders restrict the use of personal loans for business purposes.
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