The SBA Process

All businesses start with an idea. This idea requires a business plan and attaching a cost to the plan. The cost part is where small businesses’ ideas get squashed especially if the budding entrepreneur does not have the capital to scale the business. But with the help of the Small Business Administration (SBA), you can start the business you dreamed of or grow your existing one.

Small Business Administration SBA

The Small Business Administration (SBA) is an agency that is an initiative of the US government with a mandate to help small businesses (new and existing) take their operations to the next level and provides not just business loans but also training and counseling services to business owners to help them sustain their business operations.

How Long Does The SBA Loan Process Take

A wide range of banks are SBA-approved lenders and offer SBA loans based on data from the current 2024 fiscal year. Also, the SBA has at least one office in every state. The time it takes for the SBA loan to get approved will vary on the type of loan you are applying for. These are examples of the different loan programs you can apply for.

1. SBA 7(a) loan – The most common and popular loan amount is up to $5 million with low interest rates and repayment terms of up to 10 years. These are loans backed directly by the SBA with an average funding taking 60-90 days.
    
2. SBA Microloans—Loan amounts under $50,000 are often supported by nonprofit SBA microlenders, which you will work with directly. Average funding takes 30-90 days.
    
3. SBA 504/CDC loan  – These are long-term Loans for financing fixed assets (either real estate or heavy equipment) with a 25-year repayment term and a minimum of 10% downpayment, backed by the SBA but funded by certified development companies (CDCs), banks or credit unions, with an average funding taking up to 60 days.
    
4. SBA Express loan – As stated in the name, this is a loan for quick funding where the SBA approves lender’s fund applications of loan amounts up to $350,000 without review, with average funding taking 5-30 days.

How does the SBA loan process work? while the SBA can approve applications quickly, an important thing to understand is that you are not simply asking a creditor to provide you with a small business loan. You are asking the federal government to be your guarantor for the said loan, although they still have to thoroughly examine your credit history, including credit cards. This is one of the reasons why the application process for an SBA loan can be longer than the usual loans provided for small business owners.

SBA Loan Application

Business owners who want to fulfill their goals would want to know what the SBA loan process is. But right now, the process of applying for an SBA loan has been made easier because it can be done online which is not much different from the traditional way of applying from the bank.

During the application process, you will need to fill out the following details: business details including the length of its operation, monthly and annual revenue, amount of loan needed, and the purpose of applying for the loan.

Upon submission, they will get back to you within 48 hours.

SBA Loan Requirements

SBA will need you to present the following documents:

• Must be a US citizen or resident. 
• Business Plan
• Projections for the next 2-3 years
• Credit Report 
• Personal Financial Statement
• History of Past Loans
• Collateral
• Income Tax Return for the past 3 years
• Borrower Information Form
• Franchise Disclosure Document

These requirements may still change depending on the type of loan requested.

How Long Is The SBA Loan Process

SBA is the only cabinet-level federal agency fully dedicated to small businesses and provides counseling, capital, and contracting expertise as the nation’s only go-to resource and voice for small businesses.

But the real question here is: How long does the SBA process take? Funding takes a longer time depending on the type of loan you are signing up for which usually takes 60-90 days compared to the usual loans offered for small business owners. If we break down the process, below shows the turnaround time for each step:

• 1 or 2 weeks to prepare the loan application.
• 1 or 2 weeks to apply and for the SBA to review it. 
• Between 2 to 4 weeks waiting period for the approval.
• Between 2 to 4 weeks for SBA to underwrite and finalize the application.
• 1 or 2 weeks to close the application and release the funds.

SBA funding offers lower interest rates, although, in the event of non-payment, the loan goes into default. This is one of the major reasons banks and other lenders give you favorable repayment terms with low interest. SBA increases your buying power which helps you to fund your business until it grows exponentially.

The repayments are set, which is essential when financing a business, making sure that you know the exact amount that you will be paying on a monthly or yearly basis. SBA isn’t only for funding or expanding your operations, you can also use it to buy real estate which will be provided to you with a loan term of up to 25 years.

SBA Loan Approval Process

What is the process for an SBA loan? Once your application and requirements are submitted and an online lender approved by the SBA or an SBA-affiliated bank has reviewed your application, track record, and credit history, you can have a term sheet in as early as 48 hours.

A term sheet is an interest to finance which means that they have done an initial analysis on you and you fit within their loan policy. Once you sign off on the term sheet, that is when your underwriting process begins where the lender verifies your finances, such as your assets, debts, credit card debt, and income before issuing final SBA loan approval.

From that point, you will have a commitment letter which is your approval that the institution is willing to finance you. Immediately following that is your closing checklist, which as mentioned earlier on average takes around 30-90 days for you to get your funding on an SBA (7) loan, 24 to 36 hours for an SBA Express, and several months for an SBA 504 loan.

Small Business Financing

All businesses need enough start-up capital to open a business and not everyone has the resources to save the amount they need to start one. This is why they usually go for 2 options for business financing: either choose equity financing which is exchanging partial ownership or future profits of your company, or debt financing, which is a loan agreement from a bank or lender, where you’ll need to repay the amount of money you borrowed, usually with interest.

The more mature or established your business is, the more options for financing are available to you to increase your working capital. Financing a new business is more difficult because the data you will use is based on projections with no concrete evidence. When looking for which type of financing is right for you and your business, you may compare said business to related businesses that have disclosed financial information and use it as your basis for your decision.

Entrepreneurial Resources

Whether you are looking to start your own business or looking to expand your operations, the key will always be to understand which entrepreneurial resources are essential. Resources in business refer to any key elements you need to carry out your business goals. There will always be 3 resources that need to be present for a business to be successful.

1. Physical resources: These are the resources that can be seen and touched, such as land, buildings, and machinery. They are what is referred to as your fixed assets and are for long-term use which are usually your property, plant, and equipment (PPE).
    
2. Financial resources: This is the financial aspect of the business, it is the funding that you need to expand or to start operations and it can come from your account or through equity financing or debt financing.
    
3. Human resources: These are your business assets that you cannot measure in monetary value, labor is a necessity for any type of business to remain in operation to produce any type of goods or services.

Business Startup Guidance

Starting a business has its challenges, especially if you’re just starting but it can be mitigated with a good business plan. Here are steps you can take to start your own business in 2024:

1. A good business idea. Not all ideas are good ideas, and not all businesses pan out but you have to do it anyway.
    
2. Conduct thorough research. Once you’ve established the type of business you want to start, know your competitors using Porter’s 5 forces model by researching the Threat of new entrants, Threat of substitutes, Bargaining power of buyers, Bargaining power of suppliers, and the competition.
    
3. Create your business plan. Create projections on how successful your business will be based on the data available to you, and make strategies that will be key for your business to be profitable and for it to be able to reach the next stage.
    
4. Take a look at your finances. The amount of start-up capital you will require to start a business is no joke, you will need to be sure where you will be getting the money to fund your operations, whether it will come from your account, from equity investments, or a loan agreement.
    
5. Build your business. Starting a business requires time, effort, and money. In today’s market, social media is a key aspect in establishing a new business and attracting customers. It is a tool available at everyone’s fingertips, all you have to do is take advantage of it.

SBA will help you with all the key elements you need in starting or expanding your business which will help you compete in the public marketplace. As The Small Business Administration (SBA) says “We are empowering the American dream, by empowering small businesses”.