The U.S. Small Business Administration backs loans that are offered to small businesses. These loans give entrepreneurs access to funding through a lower-risk lending provider. SBA-guaranteed loans are intended to be competitive and flexible, which can be vital in enabling small businesses to thrive. The SBA does not issue the loan, but they do partner with lenders.
In the event of borrower default, the SBA will repay up to 85 percent of the loan, which greatly mitigates the risk for the small business owner. SBA loan collateral is not required for amounts of $25,000 or less. The eligibility and approval process of an SBA loan is based on repayment ability, business management qualifications, equity, credit history, and other factors that are determined by the SBA and the lending source.
Certificate Of LLC And SBA Loan Approval
If the small business applying for an SBA loan is a limited liability company, a Certificate of LLC is required. Among the items on an SBA loan application checklist are a business certificate or license most relevant to the type of business is required. An LLC certificate will vary by state and is sometimes called a Certificate of Organization or a Certificate of Formation.
The information on the LLC certificate and the requirements of filing one will also vary by state. In addition to a Certificate of LLC for SBA loan applications, businesses will need to produce other information and documents. These include financial statements that confirm the potential borrower’s ability to repay the loan, income tax returns, the resume for each principal, and any loan application history.
How To Get SBA Loan Approval
The first step to getting approved for an SBA loan is to check to see if your business meets the eligibility requirements. SBA loan requirements are based on the business itself and not just the owners or the individual entrepreneur, although their qualifications, professional experience, financial history, and other factors will affect the process.
The SBA loan approval process mainly involves determining that the business meets the SBA size requirements, is a for-profit organization, does not have existing funding sources, will be able to provide repayment. The SBA will require a series of forms and documents to confirm whether their criteria are met. A business financial statement, certificate or license, loan application history, personal resumes of all principal holders, and lease documentation are included among the documents needed for an SBA loan.
How Long Does It Take To Get An SBA Loan?
The SBA loan issue process can take as little as 36 hours, but there are many steps required to get to this point, and approval times are ultimately in the hands of the lender. On average, SBA loan processing can take between 30 and 90 days. To expedite this process, it’s recommended that the SBA loan applicants carefully prepare for their application and produce all required documents.
This includes a business plan, financial records, certifications and licenses, and more. Applicants will need to factor in the time to prepare a business plan for an SBA loan, as well as to complete forms and gather all documentation that meets with current criteria.
Once the business plan is ready and all documents are prepared, the applicant will meet with a lender.
They will then discuss the details of the loan and complete the official application. The application is then reviewed by the lender, who will also complete a credit analysis. If it’s determined that the applicant should qualify for an SBA loan, the lender approves the application and the funds can be issued. On average, applicants should expect to wait six weeks for approval starting from the point of application submission to the lender.