SBA Express Loans: Your Guide To Terms, Fees, & Eligibility
If you’re a small business owner looking for a faster way to get the cash you need to move your business ahead, an SBA Express Loan may be the right choice for you. When considering a loan (or any business decision), it’s best to understand what to expect ahead of time. Read on to find out more about the SBA Express Loan—and how to get the ball rolling if you decide that’s the right option for you.
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Compare Your Options: SBA Express Loans vs. SBA 7(a) Loans
Before digging too deep into SBA Express Loans, let’s clarify that this option is a little different than the typical SBA loan. When we talk about SBA Express Loans vs. traditional 7(a) Loans, the biggest differences are the amounts you can finance and the time it takes you to get the funds you need.
Just like any other type of SBA loan, an SBA Express loan is a long-term loan that you can put to use on almost any expense for your business. An SBA Express Loan, like an SBA 7(a), is backed by the government—and that means that the lenders who participate in the program have a guarantee on some portion of the loan. This guarantee by the Small Business Administration represents less risk for the lender and that means greater accessibility to business funds for you. With any type of SBA financing, you will enjoy lower rates and longer repayment terms with a variety of loan sizes.
There are critical differences between SBA loan products, however, as mentioned above.
How Much Can I Borrow With The SBA Express Loan?
You can borrow up to $350,000 with an SBA Express Loan. As the name implies, the turnaround time is faster with an SBA Express Loan than with a traditional 7(a) Loan—so if time is of the essence and you need money fast, this type of SBA business loan may be a lifesaver. You could get loan approval from the SBA in as little as 24 – 36 hours (however, approval from the bank will still take several more weeks or months).
The SBA 7(a) loan is also a great option if you need working capital, but it can take some time—you’ll need to factor in at least a few weeks’ time for application processing.
When Is An SBA 7(a) Loan Better Than An SBA Express Loan?
If you need more than $350,000 to finance real estate or working capital—up to $5 million—you’ll need to consider the more traditional avenue of the SBA 7(a). Because there are more approval requirements for an SBA 7(a) loan, you could also enjoy lower interest rates. What’s more, the SBA guarantees 75% – 85% of a traditional 7(a), while it backs only 50% of an Express Loan.
The good news is that they are both long-term loans, so you’ll have plenty of time to pay down the loan amount. The amount of time you’ll have to repay the debt is the same for both 7(a) and Express loans—25 years to finance real estate and 10 years for other fixed assets and working capital.
The Two Main Types Of SBA Express Loans
Within the SBA Express Loan program, you have two avenues — depending on your type of business. The first option is the standard SBA Express Loan. This loan is nearly identical to the typical SBA 7(a) loan as far as how it’s structured and how you use it. Your lender can structure your financing either as a term loan or as a revolving line of credit, and you can use the small business loan for a number of needs, including:
- Working Capital
- Real Estate
- Debt Refinancing
- Other Business Expenses
However, if you’re a business that deals in exports, there’s a loan structured for you, too: the SBA Export Express Loan option.
What Are SBA Export Express Loans?
The SBA supports American export activity through the SBA Export Loan program. While other SBA loan programs guarantee 50% to 85% of the loan amount, the SBA Export Loan guarantees a whopping 90% of the loan. This means it’s going to be easier for you to obtain the loan.
Additionally, your loan proceeds can be used for a variety of business expenses you incur as an exporter, including financing direct or indirect export activities. The Export Express Loan Program is one of three SBA Export loan options; as the name implies, it is a fast-track loan guarantee program and like the other express loan options, is geared for smaller export-related loan needs.
SBA Express Loan Pros & Cons
As mentioned, the two main differences between SBA Express Loans vs 7(a) options are the amount that can be borrowed and the time it takes to approve the loan. It may be a little easier and a lot faster for you to get the funds you need through an SBA Express Loan, but that convenience doesn’t come without cost. Because the SBA does not back as much of an SBA Express Loan (only 50%, as opposed to the traditional 75% – 85% for a 7(a)), you’re going to see higher rates associated with the higher risk. However, if an Express Loan makes the difference between getting what you need to beat an impending deadline or stalling on the tracks—the extra cost may be worth it in the long run.
Want to find out more about what you can afford when it comes to financing your business expenses? Read “Can I Afford a Small Business Loan” and learn more about how to crunch the numbers while comparing SBA rates to make the best decision for your business.
Qualifying For An SBA Express Loan
The good news is that, as previously mentioned, the requirements for an SBA Express Loan are significantly less stringent than they are for a traditional SBA 7(a) loan, but you’ll still need to provide financial information about yourself and your business, along with some additional forms.
When it comes to qualifying for the SBA Express Loan, the things that are going to ultimately matter the most are your cash flow (or projected cash flow) as well as your prowess in managing your business. Also up for consideration are things like your credit score and how long you’ve been in business. In general, you’ll need a credit score of 680 or higher to qualify for an Express Loan.
As far as the documents you’ll need to fill out in order to qualify for your loan, you’ll work through a checklist of required forms, including a Borrower Information Form, a Statement of Personal History, and an Agreement of Compliance (if more than $10,000 in loan funds are being used for construction). The lender who is ultimately issuing the SBA loan will help you work through the process and point you to the right place to start. They will also be working on their end, checking your credit score and history and verifying information about your business.
Where You Can Find SBA Express Loans
When you are ready to move ahead with the SBA Express Loan option, or you just want to learn more, the SBA provides a lender match service. You’ll start by describing what you need and a little bit about your business. In a few days, you’ll receive an email with information about lenders who are interested in issuing your loan. After that, you can then go through the process of talking to lenders and applying for a loan with the lender that is the best fit.
Of course, you have other options outside of an SBA loan. By doing a little digging, you’ll find the most business-savvy option that meets both your short and long-term business goals.