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As a small business owner applying for an SBA loan, you have undoubtedly dedicated time, effort, and patience to ensure your loan request is approved.

However, you are probably so immersed in the loan approval process that you never really stopped to wonder what comes after your SBA loan is approved. Knowing what to expect after an SBA loan approval is an excellent way to prepare yourself and your business for what comes next. The loan approval process might be necessary, but what happens when your business has been approved for the loan is just as crucial to your organization’s future.

So, what exactly happens after you get the congratulatory call that your SBA loan has been approved? Below, we have provided all you need to know about the post-SBA loan approval process to keep you one step ahead in your plans.

Small business loan in the businessman hands

What Is An SBA Loan?

SBA loans are one of the most in-demand and coveted loan types for small business owners. This is unsurprising, considering the flexible payment terms and amounts it offers to businesses needing financial support in certain areas of their business or production. 

However, if you have never heard of SBA loans, you probably wonder what it is and, most importantly, how you get one. SBA or Small Business Administration loans are partially backed by a government agency known as the SBA. Although many people think the loan is called the SBA loan because it is paid out by the SBA, this is a misconception that is far from the truth.

Whatever money you get from an SBA loan is not paid out from the SBA’s pocket. Instead, this government agency partners with legal lenders like banks or credit unions and drafts specific guidelines that facilitate better loans for small businesses with reduced risks for these lenders.

In other words, the SBA loan is a loan program where SBA agencies agree to shoulder the risks of business loans to small business owners by guaranteeing a part of the loan given to these business owners. This leads to lower interest rates and a longer pay-back term, factors that will ordinarily be considered too risky in loan programs other than SBA loans. 

How Do SBA Loans Work?

Qualifying for a conventional loan as a small business owner is undoubtedly one of the most challenging processes. You will almost never qualify for these loans, especially if you are applying for a considerable amount that the lender is willing to risk. Even if you do, you will be charged a high-interest rate and only be granted the loan short-term.

SBA loans are a lifeline for many small businesses today. With an SBA agency willing to be a co-signer on the loan, you are more likely to qualify for the amount you applied for with a lower interest rate.

However, as with conventional loans, you need to work for an SBA loan. An SBA agency might be willing to back you up on your loan application, but they will never do all the work for you.

SBA loans are like regular bank loans, meaning you must submit the necessary documents. There are different types of SBA loans, and to be eligible for any of them, you have to qualify for several general minimum requirements that will assure your lender that you can and will repay the loan you are awarded.

Each SBA loan has different requirements. However, some of the general eligibility requirements include:

  • More than two years of business history of or related to the business you are applying for a loan for
  • At least a personal credit score of 640 
  • At least $100,000 annual business revenue

You will also need essential documents like:

  • Personal and business financial statements
  • Personal tax returns
  • Driver’s license
  • Business tax returns
  • Your business license, certificate, and lease
  • Profit and loss statements
  • Ownership and affiliations.
  • Projected financial statements
  • Business plan

And more. 

These financial documents will tell your lender what they need to know about you and your business regarding the loan you are interested in. When you submit these documents, the lender will begin the underwriting process, and your loan application package will be reviewed. If necessary, the documents will be sent to the SBA for additional review. If the lender and SBA conclude that you are eligible for the SBA loan, you will begin the application process.

How Long Does The Approval Process Take?

If you require emergency funds for a business project, an SBA loan is not the best choice for you. The loan approval process often takes approximately two to three months (60 to 90 days) to be finalized, and sometimes longer before the loan can be released to your business.

The average time to secure an SBA loan is between 60 and 90 days. However, this is only an estimation. The duration might be longer or shorter depending on the type of loan you need and the lender you work with.

An SBA loan might be an excellent financing solution for your small business, but it doesn’t guarantee a fast solution- or any solution at all. To many business owners, the underwriting period looks unnecessarily extended, primarily if you have already provided all the documents they asked for.

Shouldn’t the review process involve checking the numbers in your documents? Unfortunately, this is not how it works. To start with, the loan application on its own takes a large part of the duration from start to finish in an SBA loan process. Although the loan application process varies because of the different sizes and types of loans, you will be required to compile personal and business documents that you do not have lying around your home or office.

The document compilation and submitting process can take anywhere from ten to thirty days. After successfully submitting your application to the lender, the underwriting process begins. During this process, your lender will determine your financial strengths and weaknesses. Afterward, they will decide if you are likely to repay your loan and interest within the term documented. 

Underwriting typically takes two to three weeks (14 to 21 days). However, the process might be longer if your lender has to pass the documents on to the SBA for further review. If the SBA agency ‘okays’ the underwriting process and co-signs their agreement to shoulder some of the financial risks associated with your loan, your lender then underwrites the loan.

During this period, your lender might request further documents or collect appraisals for the collaterals attributed to your loan. After the underwriting process, your lender and SBA take their time to formulate agreement documents as part of the formality. These documents will clearly state the amount of loan awarded, interest requested, collateral involved, and other repayment terms and conditions.

This process takes anywhere from ten to twenty-one days. The SBA loan approval process is not a simple process that involves movement from point A to point B. There are several logistics involved, time dedicated, unlimited patience necessary, and, of course, lots of paperwork. However, once your lender clears you for the loan requested, you will be contacted about your loan approval.

Essentially, it is crucial to know that the SBA loan approval time varies with loan type. Some of the average approval duration for different SBA loans include:

  • SBA 7(a) loan- sixty to ninety days
  • SBA 504 loan- anywhere from one month to six months
  • SBA Microloan- between thirty and ninety days
  • SBA Disaster loan- an average of four weeks.
  • SBA Express loans- an average of four weeks

 SBA Loan application form with a pen on a desk with an approved stamp

What Is An SBA Loan Approval?

The news of an SBA loan approval is undoubtedly one of the best news any business can get. However, what does it mean? More importantly, how do you know that your SBA loan has been approved? SBA loan approval means that the Small Business Administration has consented to the transfer of your loans after going over the necessary documents and coming to an agreement.

An approval means that the SBA has agreed to shoulder a percentage of the loan- usually up to 85%- and offers a lower loan risk to your lender if you defect on your repayment terms. To know if your loan has been approved, you can check your loan status or wait for your lender to contact you. To check your loan status:

  • Check the SBA website. If you submit your application online, you can also check your loan status online. This is easy, fast, and can be done anywhere you have Wi-Fi and an internet-capable device. Simply log on to the SBA portal and input your details
  • You can contact your lender or any of the numbers on the SBA website to find the status of your loan
  • You can reach the SBA by mail to find out if your loan has been approved. 

It is important to note that although the loan might be ‘SBA-approved’, the SBA is not in charge of approving or denying any loan. This is your lender’s responsibility.

When Will Your SBA Loan Be Disbursed After Approval?

Usually, after the loan is approved during the underwriting process, your lender will begin the Closing process. The loan closing process signifies that the money has been approved for disbursement. However, the loan will not be funded to your account immediately. In fact, it might not be funded for the next few days or weeks.

What exactly is the closing process?

The loan closing process is, thankfully, the last step in the SBA loan process. It involves finalizing every document that states that the borrower and the lender have agreed on specific loan terms and conditions. During this process, the lender will ask the borrower to submit and sign several documents that vary with the type of SBA loan applied for and the lending institution. Some of the standard documents on the SBA closing checklist required by the lender to finalize the SBA loan process include:

  • Business Insurance
  • Proof of downpayment 
  • Entity documentation
  • Lease or property ownership information
  • Collateral pledge
  • SBA loan application package
  • Other security documents

The closing process can become understandably overwhelming as there are lots of documents to be filed, acknowledged, and signed. The entire process is expected to last only one or two weeks. However, it can last longer, depending on your lender. You may not be required to make any payment during the SBA loan closing process.

However, some lenders will require you to pay specific fees and a ‘good faith deposit’ to facilitate the process. After you and your lender have agreed on the loan term and every agreement has been put on paper, your loan will be disbursed in the next few days or weeks. As previously mentioned, the SBA will not disburse the loan directly to your bank account.

Instead, the lending institution will contact you to discuss receiving your loan proceeds. The lender controls the disbursement as agreed during the closing process, so it is crucial to understand how the disbursement will work. Some lenders will disburse the proceeds to your account at once, some will pay in controlled amounts, and some will send them to a third party, especially if the loan was approved for equipment purchase.

What Happens Next?

After you receive your loan proceeds, it is vital to stick to the agreed loan usage plan. If you applied for equipment financing for your logging equipment, it is better to funnel the loan proceeds into purchasing it. If you applied for a loan for your restaurant, we recommend dedicating the loans to your restaurant business as agreed. Some lenders keep in touch with the borrowers to ensure the funds are being used as planned. 

What Happens If Your SBA Loan Is Denied?

This article has hopefully prepared you for what lies ahead of the SBA loan approval process. But what happens if your SBA loan is denied? Your application for an SBA loan might be denied for various reasons, some of which are that you probably did not meet the required minimum qualifications, have bad credit, or lack equity injection.

In some cases, it is possible to reapply for the loan or apply for a reconsideration. However, if that is not an option, we recommend looking into alternative lending options.

If this is a choice you have to make, we recommend not doing it alone. Let our finance experts hold your hand and guide you through the process of successful loan approval.

Let Us Help You Bring Your Financial Dreams To Life

Working with experts who know their way around different types of loans is a great way to streamline your SBA loan processing and ensure the process is as swift as possible. At Coastal Kapital, we offer SBA financing solutions and services that range from traditional SBA loan options to express loans.

We work hard to ensure our clients get the most befitting financial solutions with the best terms. With us, you can enjoy a swift and smooth loan process. If you have been denied an SBA loan, do not worry! We have solutions designed to meet your financial needs, like getting a business loan with low credit and other loan options to meet the success of your business.

To begin your loan processing journey with us, contact us at [email protected] or fill in the application form on our website.

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