SBA loans are among the most popular business loans today. In some circumstances, they are easier to qualify for, come with favorable terms, and the funds can be used for a wide variety of business purposes. The most popular SBA loan types are:
– SBA 7(a) loans: These usually have a ten-year limit and can be in amounts of up to five million.
– 504 loans: These are larger SBA loans most often used to purchase real estate or equipment—the term here can be upwards of 25 years.
– Microloans: Smaller SBA-backed loans, these usually are capped at 50k for most businesses.
The question is, is an SBA loan suitable for your company? First off, keep in mind that you have to meet the criteria of a “small business” outlined by the SBA. Also important to note that the SBA is not the one loaning the money—many are confused by this. The SBA guarantees the cash up to a certain percentage (up to 85% of the total loan amount); as the borrower, you will work with a lender qualified to disburse SBA loans.
The SBA Loan Timeline
The length of time required to process an application is how an SBA loan can be a bit frustrating. Because it does have to pass through SBA approval and lender approval, it can take a bit longer for companies to get the actual funds in their account. The basic SBA loan timeline runs as follows:
– During the first couple of weeks you will work with the lender to compile the requisite information for your loan application packet.
– The second phase consists of underwriting—this can take up to 2 weeks.
– Upon approval, the lender will put together your acceptance letter and this will be mailed to you—this can also take up to two weeks (in some cases, depending on how busy the SBA/lender is, even longer).
– Closing on the SBA loan can be scheduled anywhere from 10 to 14 days out.
As you can see, there are gaps and some wait times involved with procuring an SBA loan; again, there are also numerous benefits to this type of business loan. For many entrepreneurs, the benefits seem to outweigh the time involved with applying for and receiving the loan.
Closing on Your SBA Loan
The closing, a.k.a. the process’s “good part,” is relatively straightforward. You’ve probably spent the bulk of your time gathering the docs and information needed, including items such as tax returns, financial statements, and any relevant legal documents requested. You’ve waited for underwriting to approve you for the loan, and now the closing can finally happen.
Essentially, when closing on an SBA loan, the bulk of the work will be on the lender’s end. They have to ensure that everything is ready to go and all documents ready to be signed. They have to make sure the title is accounted for, check on any pending environmental reports, and check for any liens that could throw a wrench into things. Once all of the above is taken care of, signing the loan papers is just a matter. You will be assigned an SBA number, which will be connected with your file throughout the loan duration. Again, this ensures that the bank will get at least some of their money back should your company, for whatever reason, default on loan repayment. Once the loan funds are wired to your business account, the money is available for use. And that is all there is to an SBA loan closing.
First Union Lending specializes in helping small businesses get the funds they need to expand, thrive and succeed. Call today and let’s get started together!