Setting up a business is itself a leap of faith that only a few individuals with enough daring and courage do. Recognizing the fact that they need a little boost from lenders is another story. Here’s where the U.S. Small Business Administration (SBA) comes in: they know the financial challenges that often come with setting up and running a small business, and they are willing to offer help through the SBA small business loan programs.
Different SBA Loan Programs for Different Financing Needs
Different loans are available for different situations. For instance, SBA offers disaster loans to businesses affected by a natural disaster. Underserved communities can take advantage of SBA microloans. You’ll also find CAPLines that stem the effects of short-term cash flow troubles.
The SBA 7(a) loan is the most popular and commonly-used for startups and small businesses among these loan types. SBA 7(a) loans allow you to fund equipment purchases and property acquisitions with its low-interest rates and long repayment terms.
Getting approved for an SBA 7(a) loan might take two months or so, depending on the lender. But if your business is in trouble and you need the cash infusion now, these two months may feel like forever. Instead of waiting out this period, opt for an SBA Express Loan instead. It’s like an SBA 7(a) loan, but they can approve you in as fast as 36 hours. But like most SBA loans, your business must meet specific criteria.
What Exactly Is an SBA Express Loan?
Like the SBA 7(a) loan, an SBA Express Loan provides you with the funds you need to make the necessary purchases for your new business. It’s also partially guaranteed by the SBA. As this guarantee makes you a lower risk among lenders, they will be more likely to approve your loan. As the name suggests, you can get your loan approved in a matter of days rather than months.
Use the loan to cover expenses such as real estate purchases, constructions, or even renovations. You can even use this to refinance debt, though you must provide a compelling reason to your lender. Keep in mind that the SBA Express Loan comes with a lower principal amount and a higher interest rate. There are two types of SBA Express Loans: the Standard and the Export Express.
Here are some quick facts about the Standard Express loan:
- Receive as much as $350,000 with a 50% guarantee from the SBA
- Interest rates can be fixed or variable
- Higher interest rates when you borrow a lower amount
- Interest rates will never go above 6.5 percent over the prime rate
- Repayment terms can be between five and ten years
As for the Export Express loan, here’s what you need to know:
- Receive as much as $500,000 total loan amount
- Guarantee of 90 percent for loans under $350,000
- 75 percent guarantee for loans greater than $350,000
- Interest rates go higher with a lower loan amount but never above 6.5 percent over the prime rate
- Has a faster turnaround time of 24 hours at the minimum
How Fast Are Express Loans?
Depending on the type of Express loan, the lender can approve you within 24 to 36 hours. This scenario can only happen if you have all the required paperwork in the first place. Ensure that you work with an efficient lender that you can trust to act on your loan right away.
Still, getting approved for an Express loan doesn’t mean the funds get transferred immediately. The loan provider needs to process it, which will also determine its terms and conditions. The entire process, from application to closing your loan, can take a few months.
What Are the Requirements?
Your lender can only begin to process your express loan if you can provide him or her with the complete paperwork, which includes the following:
- Detailed business plan
- Itemized list on how you will spend the money
- Resume detailing relevant experiences you’ve gained
- Financial statement showing your current personal fixed assets and liabilities
- Copies of your tax returns
- Credit documents showing your credit score is above 680
- Proof of a profitable business that will bring at least 10 percent more
Keep in mind that not all Express loan applications are approved, and more often than not, it’s not your business’ fault. Most likely, your chosen lender isn’t as familiar with your type of business. For instance, while you’re the owner of an antique shop, the lender may be used to working with restaurants. This scenario may make them less inclined to work with you.
To avoid this, make sure to shop and compare the lenders through our website: LendingBuilder.com. Go through each of their pros and cons, and get to know more about your options.
