Have you struggled to secure conventional financing for your small business – and do you need funds quickly?

If you’re in this tight spot, an SBA Express loan might just fit the bill.

What Are SBA Loans?

The SBA will respond to your application within 36 hours, which means you can get funded and get to work sooner.

The United States Small Business Administration (SBA) is an independent agency of the federal government that assists small businesses and entrepreneurs. The SBA partners with local lenders (banks and credit unions) to provide affordable loans for a range of business purposes, including startup costs, working capital, real estate and equipment purchases, and debt refinancing.

The SBA guarantees a portion of each loan to mitigate lender risk and enable more small-business owners – including those in underserved communities – to access the capital they need.

Reasons to Consider an SBA Loan

SBA loans can offer small businesses several key advantages, including:

• Competitive rates: Because they’re a lower risk for lenders, SBA loans often feature lower interest rates.
• Lower fees: SBA loans may involve an upfront and/or yearly service fee, but these are generally nominal.
• Longer terms: Maximum maturities range from 10 years (for working capital, inventory, and equipment) to 25 years (for real estate).
• More flexibility: Loan amounts range from $500 to $5.5 million, depending on your needs and cash flow.
• Continued support: The SBA and its local partners offer free and low-cost business training and counseling.

What is the SBA Express Loan Program?

Officially named the 7(a) Express, this program features an accelerated turnaround time for SBA review. The agency will respond to your application within 36 hours, which means you can get funded and get to work sooner.

In contrast to the Standard 7(a)’s maximum loan amount of $5 million, Express loans top out at $500,000. Interest rates may be fixed or variable and are subject to SBA maximums. Rates tend to be slightly higher than those for Standard 7(a) or 504 loans.

Commonly, Express loans require an owner equity contribution of 10% to 30%, with 50% backed by the SBA and the remaining 20% to 40% backed by your bank or credit union. Lenders are not required to take collateral for loans of up to $25,000. Over that threshold, they can use their existing collateral policies.

If you’re in the export business, the SBA’s Export Express program can enable you to obtain an Express loan with increased SBA backing (up to 90%) and decreased response time (within 24 hours).

Am I Eligible?

Specific eligibility requirements for Express loans can vary by lender. For instance, the SBA doesn’t designate a minimum credit score or length of time in business, but individual lenders can and do set their own rules. In nearly all cases, though, your business needs to:

• Physically operate as a for-profit company in the U.S. or its territories
• Pursue a sound business plan in an eligible industry (e.g., excluding lending and gambling)
• Meet SBA size standards (which depend on your industry and annual revenue)
• Show owner equity (time and money you’ve invested in the business)
• Be in good standing on all existing government debts
• Demonstrate a need for funds and the ability to repay them from projected business cash flow

How Can I Use It?

SBA Express loans can be used for a variety of purposes, including:

• Working capital
• Revolving funds (based on the value of existing inventory and receivables)
• The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
• The purchase of real estate (including land and buildings)
• The construction of new buildings or the renovation existing buildings
• Establishing a new business or acquiring or expanding an existing business
• Refinancing existing business debt (under certain conditions)

How Do I Apply?

You can work directly with your chosen lender to get the SBA Express application process started. True to their name, Express loans usually require less paperwork than Standard 7(a) or 504 loans, but you’ll still need to gather a number of documents for your lender to review. Here are some of the things you may need to provide:

• Profit and loss statements (current within 180 days)
• Projected financial statements (one year)
• Ownership and affiliations
• Business license or certificate
• Loan application history
• Income tax returns (three years)
• Resume
• Business overview and history
• Business lease

Ask your lender for a complete checklist of required documents. Once you’ve finished your application, your lender will submit it to the SBA for approval, close the loan, and disburse the funds. The whole process may vary quite a bit, but generally takes between 30 and 60 days.

How Do I Pay It Back?

As with eligibility requirements and application processes, repayment terms for SBA Express loans can vary by lender. They’re normally structured as term loans that are repaid with monthly payments of principal and interest.

With a fixed rate, you’ll pay a set amount every month until the end of the agreed-upon term, much like a standard residential mortgage or auto loan. With a variable rate, the amount you pay may change from one month to the next.

The SBA prohibits lenders from charging fees for processing, origination, application, or brokerage. However, you may pay an upfront guaranty fee and an annual service fee. Borrowers may also be subject to a prepayment penalty depending on the loan’s maturity date and the amount of time that’s elapsed since disbursement.

What Are My Other Options?

There are several other types of SBA loans you may want to consider, including:

• 7(a) loans, which are the most popular SBA loans and can be used for a wide range of purposes
• 504 loans, which can be used for long-term fixed assets like real estate and major equipment
• Microloans, which provide up to $50,000 for smaller startup and expansion needs
• Disaster loans, which help businesses overcome economic injury or damage in the wake of a declared disaster

Your lender can also help you to investigate non-SBA loan products and weigh the pros and cons of each.

Take the First Step Today

To explore all your small-business financing options, including SBA Express loans, consult your financial institution.

 

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