Need Cashflow? SBA Loans Can Help, but How Long is the Wait?

SBA loans are like unicorns – if you can catch one, do! Catching one, however, requires a little patience and planning. SBA loans are a good option for anyone looking for working capital to expand their business. The Small Business Administration authorizes lenders to provide capital and thus reduce their risk, allow lenders to lower their requirements, and process applications more quickly.  As attractive as this may be to your cash-strapped business, you should not wait until the 11th hour to apply, as qualifications, the application process, and wait time vary from loan to loan.

First time applying for an SBA loan? Not sure which one is right for you and your business? Don’t panic. We’ve got you covered. In this article, we’ll look at four common types of SBA loans, their average approval time, and qualifications. The right one for you depends on the amount of money you need, how quickly you need it, and what you are attempting to fund.

Express Loans

Avg. Approval Time: 36 Hours

SBA Express Capital L Loans, often called bridge loans, have the fastest approval time. These are loans of up to $350,000 with a streamlined and expedited process, which can put cash in your hand in as little as 30 days.

These loans are intended for emergency funding needs. The Community Advantage (CA) program is similar, differing only by a lower limit ($250,000) and an interest rate ceiling of Prime +6%. The SBA developed the CA program to promote economic development in underserved areas.

NOTE: These loans are meant to be facilitated ONLY by banks your business has an established relationship with. Your bank should have most of the necessary information needed to apply, so approvals tend to be faster.

The SBA can help you find a lender in your area who can offer you a good deal for your specific requirements in terms of loan size and term. If you need quicker answers to your lending questions, use the chatbot in the bottom-left portion of your screen or click here and we’ll get back to you ASAP!

CDC/504 Loan Program

Avg. Approval Time: 30 - 45 Days

CDC/504 loans typically take around a month to approve, though it’s not unheard of for approval to take up to 6 months. These are dual-approval loans, involving both the SBA and a Certified Development Company (CDC). Since both parties play a role in the approval process, the wait for funds could be extended.

A CDC is a special non-profit that provides funding and assistance to businesses in their area. These loans have narrow limits on their purpose, but often offer a better deal if what you are trying to fund falls in those areas and your region or town has a CDC. Key details include:

  • Loan amounts range from $25,000 to $5.5 million (note that it is still $5 million if you are not a manufacturer)
  • Interest is fixed
  • Loan terms range from 10 years for equipment to 20 years for real estate
  • These loans can be refinanced
  • Loans may only be used to purchase or renovate capital assets such as buildings and equipment

This loan program is intended to encourage investment in local communities, hence the limit. It’s a good option if you need to purchase or renovate a building or if your business has unusually high equipment needs. CDC lenders will also take into account whether your proposed project will benefit the local community in terms of improving land use and creating jobs. Because of this, these loans can be harder to get, but often offer a better deal in terms of interest and can be refinanced later when your business is considered less of a risk by lenders. These loans are a hybrid between funds from the CDC and funds from a financial institution.

Microloan Program

Avg. Approval Time: 30 - 90 Days

The SBA’s microloan program connects businesses with approved intermediary lenders. The typical approval time is around 30 days, but both the SBA and the intermediary must approve the loan, which could delay the process by up to 60 days.

This program is intended for smaller loans for specific purposes. Microloans can be a good option if your concern is an immediate shortfall in cash flow caused by specific purchases or situations where operating capital is affected by payment and billing cycles. Key details include:

  • The maximum loan amount is $50,000
  • The maximum term is 6 years
  • Interest rates are negotiable
  • Loans may be used for working capital or to purchase equipment only; they cannot be used to purchase real estate or refinance existing debts

Microloans may be for very small amounts and can be beneficial for small businesses or even sole proprietors. The intermediary sets the requirements. Microloans are also available for not-for-profit childcare centers. Because microloans spread the risk amongst multiple lenders, they are often easier to get for very small businesses or startups that might be struggling to buy, say, computer equipment to get their business moving forward.

7(a) Loan Program

Avg. Approval Time: 60 - 90 Days

7(a) loans are the closest to traditional funding, and therefore require a more extensive application and approval process. Generally, you get the loan from an approved bank or credit union, who partners with the SBA. The SBA monitors these institutions and ensures they meet certain ethical requirements. Some key details:

  • Loan amounts range from $50,000 to $5 million
  • Loan terms range from up to 25 years for real estate to 5 to 7 years for working capital; mixed-use requests are weighted
  • Loans may be used for most business purposes, including buying real estate, building locations, or acquiring a business
  • Loans can be used to refinance existing debt
  • Interest rate is negotiable
  • Interest rate is limited but can be as high as 25% a year
  • Requirements vary by the size of the loan, with a cutoff of $350,000

Is an SBA Loan Right for Your Business?

If you’re fortunate enough to qualify for an SBA loan over other financing options, congratulations! Now starts the application process, which can be extensive. It’s worth it though, since the terms and conditions are reasonable, down payments tend to be lower, there are limits on interest rates, and term lengths are negotiable. To qualify, your business needs to fall under the size requirements for small businesses, which vary by industry, and show some kind of a profit. Remember that not everyone who applies for a loan is accepted, so if you make it this far the unicorn is within your reach.

You are also expected to provide the lender or intermediary with details about your planned use of the funds. Additionally, owners of the business may face personal risk. In some cases, personal property may be put up as collateral to the loan. You will also need to provide the required data to allow the lender to assess your cash flow and ability to repay the loan. You will need to do projections for a startup or a total change of ownership. Your personal credit score may also be taken into account.

Don’t let what might seem to be strict criteria deter you from applying. An SBA Loan is an accessible funding solution for your business as long as you prepare in advance and prep your application before submitting it. Want to know how your business can qualify for any SBA Loan? Direct Payment Group can help! Start your SBA Loan application process today by clicking the button below.

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