Approval Time For SBA 7(a) Loans, 504 Loans, Disaster Loans, & Microloans

Wondering what the turnaround time is for an SBA loan?

With typical lenders, the SBA loan approval time is two to three months. Some lenders will offer funding in as little as 30 days, although these efficient lenders are quite rare. The process requires patience; potential borrowers must go through many steps of paperwork and vetting. You will need to prepare all the necessary documents, meet with a lender, complete more documents, wait on underwriting, and finally, wait for closing.

The more exact and correct you can be in your preliminary applications, the better chance you have of getting a quick response from the SBA. Most importantly, be prepared to wait, and don’t be surprised if you are not regularly updated on the status of your application.

Read on to find out how long you may have to wait and how to speed up your SBA loan approval time.

SBA Loan Approval Time

The expected SBA loan approval time varies, depending on the type of loan you are applying for. Learn more about expected approval times for SBA 7(a) loans, SBA 504 loans, disaster loans, and microloans below.

SBA 7(a) Loan Approval Time

An SBA 7(a) loan usually takes about two to three months to be approved. If you have the option of working with an SBA Preferred Lender, your application may be approved much faster, comparatively speaking. Of course, the exact time it will take to be approved depends highly on you and your lender.

SBA 504 Loan Approval Time

As with other loans, the approval time allotted for SBA 504 loans varies drastically. On average, the loans take around 30-45 days from application to funding. Approval time can, however, take anywhere from one to six months. Because the 504 lending program is a dual-approval loan involving both a Certified Development Company (CDC) and the SBA, there are more variables to consider. The timeline relies heavily on the borrower and their specific needs.

SBA Microloan Approval Time

SBA Microloans are given in smaller amounts — $50,000 or less — so the process can be somewhat shorter. Receiving a microloan can take anywhere between 30 and 90 days. Your application must be approved by both an intermediary lender and the SBA, so patience is key when waiting on a microloan.

SBA Disaster Loan Approval Time

Receiving an SBA disaster loan is a three-step process: Application, Property Verification & Loan Processing Decision, and Loan Closing & Disbursement of Funds. The SBA states that the first and second step takes an average of four weeks. Step 3 takes around five days for borrowers to receive funds.

What About SBA Express Loans?

Are Express loans actually faster than regular SBA loans? In short, yes. The downside is that, while the processing time is much quicker than other SBA loans, the maximum loan amount is low at $350,000. The Express loan is typically approved by the SBA within 36 hours, making it the fastest SBA loan application process. However, the approval from the partnered bank could take several weeks, which means that the total time to funding could be one to two months, depending on the lender. Still, this is at least a month faster than most other SBA loans.

As with other SBA loans, you will also need to prepare a comprehensive loan application package to apply for the Express loan. This process, of course, will take some time, though Express loans require fewer documents compared to a 7(a) loan. Required forms for an Express loan include a Borrower Information Form and a Statement of Personal History. If more than $10,000 in loan funds will be used for construction, you’ll also need to fill out an Agreement of Compliance. The Express loan’s issuing bank should provide direction on how to put together the application package and help you work through the process as needed.

Another thing to know about Express loans is that because the SBA backs only 50% of an Express loan (compared to 75%-85% of a traditional 7(a) loan), interest rates on Express loans tend to be somewhat higher.

Why SBA Loans Take So Long: The SBA Loan Application Process

When applying for an SBA loan, know that you’ll need to be patient. Most SBA loans will require a lot of documentation and verification, which makes the process quite lengthy.

If you’re applying for a 504 loan, your application will be roughly thirteen pages long. You’ll need information on project costs, energy efficiency goals, debenture pricing, and more. Because the 504 loan is a dual-approval process, it can take even longer. Your completed application will be submitted to the CDC, which will then assess the application and forward it to an SBA Loan Processing Center.

Other SBA loans have similar processes in which a potential borrower must fill out an online form describing the business’s needs. From there, the SBA will match you with possible lenders with whom you can discuss SBA loan rates and terms and formally apply for their loan.

These in-depth applications do take time to fill out. Once the application is completed, the documents must be reviewed by multiple sets of eyes, which makes the waiting periods lengthy.

First Step: Putting Together An SBA Loan Application Package

Here are some items you will need in your SBA Loan Application Package:

• Business Plan: Your lender wants to see concrete evidence that your business will be able to pay back the loan. You can show this by including:
  • A description of your small business, including information on your product/service
  • Plans for your business
  • An outline of your team
• Statement Of Purpose: This is your opportunity to tell the SBA what you intend to do with any funding you receive. You will need:
  • A statement on how the loan will benefit your business
  • An explanation of how you, as a business owner, have invested your personal resources into the business
  • Any other information you have about your loan request
• Financial Statements: Here’s where you can show the lender that the numbers are in your favor. To demonstrate that you are financially capable, you will need:
  • Personal Financial Statements: personal net worth, debts
  • Cash Flow Statements: income, expenses
  • Income Statements: profit, loss
  • Balance Sheets: business value and/or net worth

Next Step: Underwriting

Formal underwriting for an SBA loan usually takes about two to three weeks. This time allows either your underwriting team or loan officer to discuss any questions or concerns they may have about your loan. During this time, you may be asked to participate in more meetings to discuss your plans or even to fill out more paperwork. The underwriting period can take longer if the SBA requests extra documentation.

Final Step: Approval & Loan Disbursement

Once you’ve been approved, it generally takes funds about five days to reach your account. The timeframe can vary depending on the type of loan and your particular case. Be sure to ask your lender how long it takes for approved funds to get disbursed.

How Does SBA Loan Turnaround Time Compare To Other Types Of Business Loans?

We’ve established that SBA loans can take up to 90 days or longer to be approved and released to small businesses. In comparison to other business loans, this is quite a lengthy process. When applying for a traditional business loan at a bank, you can expect to get an answer within only two to four weeks. An even faster option is an online business loan. Online resources, although more expensive than an SBA or a bank loan, boast short applications that take minutes and can provide funding within as little as 24 hours.

The appeal of an SBA loan, of course, is not that it is quick or simple but that it is guaranteed in amounts up to 85%, and often offers low rates and long terms.

Is It Worth Waiting For An SBA Loan?

This depends on how fast you need the money.

If it’s an emergency and you need funds in less than three months or your business will not survive, then the long SBA loan approval time will probably be a dealbreaker. Instead, you should seek out an alternative loan—such as an online short-term loan. However, if you can reasonably wait up to a few months to get funded, then it is absolutely worth waiting for an SBA loan. You won’t be able to get as good of a rate outside of the SBA.

Need Cash Fast? Two Ways To Get An SBA Loan If You Need Cash Now

If you decide to proceed with an SBA loan, but still want to get your cash as soon as possible, be sure to fill out your SBA paperwork and preliminary applications as accurately and completely as you are able. This is your best bet of getting a fast response from the SBA. The less the SBA has to do to get information from you, the better your experience will be.

Of course, a speedy SBA loan approval time is never a guarantee, even if you do have all your documents in order. If you truly need to know your funds will be here sooner than later, you can check out these resources for small business owners:

• Apply For An SBA Loan Through SmartBiz: SmartBiz is an online resource that uses technology to speed up the SBA loan application process. By applying online, much of the cost, time, effort, and paperwork of the traditional SBA loan application process are eliminated. SmartBiz can help you determine if you have a good chance of qualifying for a loan before you fill out a full application, and the time from application to funding is generally shorter than the traditional process. However, SmartBiz currently only offers loans for debt refinancing, working capital, and commercial real estate needs, so if you are looking for a different type of SBA loan, you’ll have to look somewhere else. Read our SmartBiz review to learn more.
• Get A Bridge Loan: A bridge loan is a transitory, short-term loan that your small business can use until all of your needed funding comes in from other sources. If you’re looking for a temporary bridge loan (without a prepayment penalty), check out our favorite small business loan providers for this year.

FAQs About SBA Loan Approval Time

Final Thoughts

While SBA loan applications do take a bit longer than traditional and online business loan applications, they do have their positive qualities, some of which include low interest rates and long repayment terms. If you think an SBA loan is right for you, begin the application process before you need cash. This way, the potentially lengthy SBA loan approval time won’t be a hindrance to you. Most importantly, be sure to look into all your options before deciding on what is best for your small business.