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How Long Does it Take to Approve an SBA 7(a) Loan?
SBA 7(a) approval time varies, depending on the lender’s experience level. Preferred lenders offer fastest closings, followed by certified lenders and standard lenders. All will guarantee your small business loan under SBA rules.
No one likes to wait for news, and small business owners are no exception. When you’re applying for a bank loan, one of your questions (whether you verbalize it or not) is, “How long is the approval process?” You want to find out whether you will be successful in obtaining the funding you need to start or grow your business. SBA 7(a) approval time is meant to be relatively short, so you can move forward either way.
How the SBA (7a) Loan Program Works
Before we talk about average approval times for the SBA 7(a) loan, it’s good to get a big-picture view of how the loan program works. The Small Business Administration (SBA) 7(a) loan program has been providing assistance to creditworthy business owners for more than 60 years. It was developed to provide help to entrepreneurs who can’t obtain conventional financing and who have exhausted other sources on their search for funding.
Under the program, the SBA provides lenders with a guarantee in case the borrower defaults on the loan. In that instance, the SBA will step in and pay off the portion of the loan guaranteed by the federal government.
SBA Loan Guarantee Amounts
The SBA guarantees loans for small business owners up to the following amounts:
85% on a loan of $150,000.00 or less; and
75% on loans of up to $5 million.
How long does the SBA 7(a) loan approval process take?
The SBA 7(a) loan approval process can take between 7-10 business days if you are using the Standard 7(a) Loan Processing. If you are using the Certified Lenders Program (CLP) Processing, the process can be expedited and only take 3 business days.
For more information, please see the following sources:
What factors can affect the timeline for SBA 7(a) loan approval?
The timeline for SBA 7(a) loan approval can be affected by the type of loan processing chosen, the experience of the lender, and the need for any appraisals or reports in support of the loan application.
The SBA 7(a) loan is processed in three different ways: Standard 7(a) Loan Processing, Certified Lenders Program (CLP) Processing, and Preferred Lenders Program (PLP) Processing. The approval time for each type of processing is different, as shown in the table below:
SBA 7(a) Loan Processing Type Approval Time Standard 7(a) Loan Processing 7-10 business days Certified Lenders Program (CLP) Processing 3 business days Preferred Lenders Program (PLP) Processing 24 hours or less The experience of the lender is also a factor in the timeline for SBA 7(a) loan approval. Certified lenders have experience dealing with borrowers under SBA loan programs and have met specific performance standards. The SBA is able to expedite application approvals for borrowers dealing with these lenders.
Finally, the need for any appraisals or reports in support of the loan application can also affect the timeline for SBA 7(a) loan approval. These could significantly lengthen the amount of time it takes to get approved.
What documents are required for an SBA 7(a) loan application?
The documents required for an SBA 7(a) loan application include:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan
In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.
What is the maximum loan amount for an SBA 7(a) loan?
The maximum loan amount for an SBA 7(a) loan is $5 million. If you borrow the maximum, the SBA will be funding $3,750,000 of the loan and your private lender will cover the rest.
Source: SBA 7(a) Loan Calculator and SBA 7(a) Loan Amounts, Maturity, and Rates
What is the interest rate for an SBA 7(a) loan?
The interest rate for an SBA 7(a) loan depends on the amount of the loan and the maturity of the loan. For loans with a maturity of less than 7 years, the interest rate is the Wall Street Journal Prime Rate plus 4.25% for loans of $25,000 or less, 3.25% for loans between $25,001 and $50,000, and 2.25% for loans of $50,001 and up. For loans with a maturity of more than 7 years, the interest rate is the Wall Street Journal Prime Rate plus 4.75% for loans of $25,000 or less, 3.75% for loans between $25,001 and $50,000, and 2.75% for loans of $50,001 and up. The current Wall Street Journal Prime Rate is 8% as of May 2023.
With no minimum loan amount required, you have the flexibility to arrange for a loan in the amount you need for your business.
SBA 7(a) Approval Time for Different Programs
Assuming you qualify for the amount you wish to borrow, the approval time for an SBA 7(a) loan will depend on how much experience your lender has with processing this type of financing. (Keep in mind that these SBA 7(a) approval time frames do not include time required for any appraisals or reports needed in support of your loan application. These could significantly lengthen the amount of time it takes to get approved.)
By choosing your lender carefully, you may be able to have your loan application processed more quickly. Here are a few different ways the SBA 7(a) loan is processed.
SBA 7(a) Loan Processing Type | Approval Time |
|---|---|
Standard 7(a) Loan Processing | 7-10 business days |
Certified Lenders Program (CLP) Processing | 3 business days |
Preferred Lenders Program (PLP) Processing | 24 hours or less |
Standard 7(a) Loan Processing: 7-10 Business Days
This type of loan processing is used by lenders who will only see an SBA 7(a) loan application occasionally. Under this model, the lender submits a complete application package and requests an SBA guarantee.
The SBA reviews the package and will usually confirm the lender’s decision about whether to approve the loan. This process generally takes between seven and 10 business days.
Certified Lenders Program (CLP) Processing: 3 Business Days
Certified lenders have experience dealing with borrowers under SBA loan programs. They have also met specific performance standards.
The SBA is able to expedite application approvals for borrowers dealing with these lenders. A complete application is submitted. The SBA will confirm the lender’s decision by conducting a credit review only, instead of a complete review of the application. The process is much shorter than the standard 7(a) loan approval processing -- it only takes three business days.
Preferred Lenders Program (PLP) Processing: 24 Hours
The most experienced SBA lenders are included in the PLP program. They have the authority to process and close loans independently. These lenders submit a checklist to the SBA confirming that the lender has made the appropriate inquiries about the borrower.
The SBA assigns a loan number to the lender’s request. This process takes the least time of all, which can be 24 hours or less.