If you’re a small business owner who has begun the process of researching SBA loans to fund your business, you may be wondering what the process is like and how long it takes. (Don’t worry … there’s nothing to fear!)
Generally speaking, you will find the process of applying for an SBA loan to be similar to other types of loans. You have to demonstrate a need, fill out an application, and provide supporting documentation. But, the documentation requirements for SBA loans tend to be greater.
We are always up-front with SBA borrowers that obtaining funding via an SBA loan can take longer. But the good news is that many things are within your control. By being responsive to requests for required documentation and taking the time to fill out forms accurately and completely, you can speed up the timeline.
Is an SBA Loan Worth the Extra Time?
You may still be wondering: is an SBA loan worth the extra time and effort?
In our opinion – absolutely! Here are a few reasons why.
- SBA loans are a low-cost source of long-term financing. The interest rates on SBA loans are competitive. Though it may take longer to receive funding, borrowers can save thousands of dollars over the long-run, especially compared to the “fast-capital” options available today, where a business can apply for an unsecured loan online and receive funds extremely quickly. But beware, these loans come at a price that often includes hefty rates and fees.
- SBA loans can be used for flexible purposes. With SBA loans, the lender receives a loan guarantee from the SBA. The guarantee can replace traditional collateral, which is typically required to secure a loan. This means that SBA loans can be used for a broader array of purposes, such as making improvements to a leased space, purchasing raw materials, supplies or inventory, or working capital expenditures.
- SBA loan terms can make repayment more manageable. SBA loans have repayment terms that are often longer than conventional loans. The competitive interest rates and longer terms can make monthly payments lower, which for many borrowers, improves their cash flow. This helps the business retain more cash and improves financial stability.
Applying for an SBA Loan
So, what is the process of applying for an SBA loan like? Here are the key steps you can expect to follow.
Fill out an SBA loan application. To begin the process, you will need to complete the SBA Borrower Information Form, Form 1919.
Complete the required SBA forms. To determine eligibility, the SBA requires that borrowers fill out a Statement of Personal History, SBA Form 912, and a Personal Financial Statement, SBA Form 413.
Gather financial statements and documentation. The SBA will need to review documentation that supports your loan application and establishes your ability to repay the loan. The specific documents will vary based on your situation, but the following list will give you a good sense of what you may need.
- Business Profit & Loss statements
- Projected financial statements
- Ownership and affiliations
- Business certificates or licenses
- Articles of incorporation or corporate bylaws
- Income and business tax returns
- Loan application history
- Resumes for each principal
- Business lease
- If you are purchasing a business, a bill of sale, financial statements, business tax returns and schedule of assets.
Ready to Learn More or Apply for an SBA Loan?
Having an understanding of the SBA loan process helps borrowers to maintain realistic expectations of the timeline. On average, the process can take 90-120 days – but remember, much of that depends on how quickly you, the borrower complete forms and provide documentation! SBA loans help thousands of small businesses start, grow, and thrive every year. If you’re ready to learn more or move forward with an application, working with an experienced SBA lender will make the process much more efficient. Contact the experienced small business lending team at LSB today!
