A traditional SBA 7(a) loan can offer valuable working capital or help you refinance expensive debt.. When you're looking for a lender, an important detail to know may be the timelines to funding. Although the SBA 7(a) loan application process might be more than others, the reduced rates, long terms, and low monthly obligations make it worth the effort.
What is definitely an SBA 7(a) loan?
The SBA 7(a) loan is easily the most popular type of SBA loan. The SBA doesn't make these small business loans; it guarantees them. The maximum loan amount is $5 million, and money may be used for working capital, property, equipment, or debt refinance. Interest rates are low and repayment periods come from 10 to Twenty five years.
SBA loan timeline
The SBA loan process generally takes between 60 to 90 days depending on the lender and loan size.
This isn't much longer than other standard small company loans take. SmartBiz(R) has increased the procedure and is typically faster, taking between 30 – 45 days.
The most time-consuming part of the process is often gathering the necessary paperwork. Because the loans are guaranteed by the government, more documentation may be required. Organization and dealing together with your accountant might help the procedure exercise smoothly.
The SBA loan process
Since each business is unique, there isn't a set-in-stone timeline for applying and funding. But generally, an SBA loan application follows these steps:
- Business owner gathers documentation, and applies for loan (someone to Thirty days)
- Lender underwrites the borrowed funds (10-14 days)
- Lender approves the borrowed funds, and sends dedication letter (10 to 21 days)
- Lender closes on the loan (seven to 14 days)
Make sure you train with a lender that has strong customer support support. Financing application could be complex, and a responsive reason for contact can help solve issues or answer questions.
Eligibility requirements to try to get an SBA 7(a) loan
Each lender has unique eligibility requirements for an SBA loan. For instance, some lenders may need your own business plan while others don't. (SmartBiz, for example, doesn't need a business plan).
- Time in business must be above 2 years
- Business owner's personal credit score must be above 650 (675 for an SBA Real estate loan)
- The business must be U.S. based and of U.S. citizen or lawful permanent resident who's a minimum of 21-years old
- No outstanding tax liens
- No bankruptcies or foreclosures previously 3 years
- No recent charge-offs or settlements
- Current on government-related loans
Advantages & disadvantages of SBA 7(a) loans
Adding small company debt for your books – even a cheap SBA loan – isn't a decision to be taken lightly. You will find benefits and drawbacks to each type of mortgage product, from bank loans to credit lines. It's always a good idea to meet with a financial professional prior to signing the contract. Review these pros and cons for an SBA small company loan so that you can get the best decision for the business.
- Highly competitive, a low interest rate rates
- Long loans (10 years for traditional 7(a), 25 years for real estate SBA loans)
- Fixed and variable-rate options are available
- A number of companies are eligible
- Wide use of proceeds allowed
- Most SBA loans, including 7(a) loans are fully amortizing, meaning borrowers do not have to worry about balloon payments
- Approval times can be lengthy
- Lots of documentation required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required
How to try to get an SBA 7(a) loan
Applying for an SBA 7(a) loan takes some work on a company owner's part to submit accurate financial documents and other paperwork.
Your best bet will be as organized and prepared as possible and also have realistic expectations about effort and timing. A great technique is to work with your bookkeeper, accountant, or another small company financial professional to collect paperwork. Here are steps to help the process move smoothly.
1. Determine Eligibility
Before beginning your application, ensure that you meet basic eligibility requirements. You won't want to invest your energy if you do not qualify. Eligibility requirements, in addition to SBA requirements, can differ from lender to lender.
2. Make a Business Plan (Note: SmartBiz doesn't need your own business plan)
Submitting your own business plan is really a unique opportunity for you to definitely present a guide with concrete details on how you intend to achieve your goals. Your own business plan can help you set milestones to determine success and position yourself within your industry. You'll give lenders a precise picture of where you're headed in the future.
3. Gather the paperwork
No matter which lender you're working with, having all of the necessary documentation is vital to obtaining your funds as fast and efficiently as you possibly can. As you're progressing through the application, you'll need to show you're able to make regular payments. Probably the most common documents that our bank partners request include:
- Personal & Business Tax Returns
- Personal Financial Statements, required from each individual owning 20% or more of the company
- Profit and Loss Statement
- Balance Sheet
4. Connect with an SBA Loan Lender
Avoid going from bank-to-bank to locate a lender who'll approve the application. Whenever you work with SmartBiz Loans, we'll help you improve your probability of obtaining a \”Yes\” by matching you with the bank partner most likely to fund your company. See if you prequalify* by answering a few questions about your business and you'll be on your way to applying for quick, easy, and transparent funding.
The SBA loan process might take 2 to 3 months to get together from gathering documentation to funding. You'll need to budget time for you to organize paperwork before submitting a credit card applicatoin to streamline the procedure. Although SBA loans require more details from the business owner kinds of funding products, it's worth it in the end. When the application is approved, funds could be deposited to your banking account in as quickly as 7 days. SBA loans are known as the best possible small company loan on the market. Ultimately, the savings is going to be worth your time and effort.