Loans under the SBA 7(a) and 504 programs

How long does it take to apply for a loan from start to finish is by far the most frequently asked question I get. You’ll need 45 to 60 days. Each step is necessary to complete the process, so it takes as long as it needs to.

Next, you’ve got to know how to do it. Following is a step-by-step guide.


Steps 1 to 11

This is the first step in the loan application process. As part of the underwriting process, the lender provides the applicant with this needs list. Forms 1919, 413 and 912, as well as SBA Forms 1919, 413 and 912, are included. From the date of receipt of the monetary deposit and the signed Letter of Interest, the lender typically takes 2 – 4 days to generate this needs list.

Next, we will proceed to the underwriting process. The amount of time it takes to underwrite the loan is usually one to three weeks. This depends on the lender’s pipeline density, the availability of underwriters and support services, and the amount of information the underwriter needs to render a decision.

The third step is credit decision-making. The credit decision is announced following the completion of underwriting or at the conclusion of a loan committee meeting. Some lenders process loan requests by individual underwriters in an underwriting loan center. Some lenders maintain a decision-making body known as the “loan committee.” It takes an underwriter five to ten days to review a loan application and respond with questions or a credit decision, which means the loan has been approved or declined. In a meeting of the loan committee, which usually occurs once a week or every other week, a loan is decided upon.

For SBA 504 loans, an additional authorization, or SBA approval, must be obtained, which may add an additional 5 – 10 working days to the entire application process.

This is the fourth step: a commitment letter. Upon approval of a loan application, a commitment letter is sent to the applicant outlining the conditions necessary to close the loan. As a result of this step, an order for third-party reports and the collection of closing documents can be initiated.

Lastly, we prepare third party reports and closing documents. An appraisal is ordered by the lender from a third party approved by the Small Business Administration (SBA). There is a possibility that the appraisal process will take two to three weeks, plus two to five days for the lender to review it. In addition to the real estate purchase, the addition of a business acquisition will require a business valuation. This will take about two weeks plus two to five days for the lender to complete its review.

In this process, the sixth step is quality control and file auditing. The lender conducts a final review of all closing documents and third party reports required to close the loan within two to five days of the completion and approval of all documents. When the lender deems the loan file to be complete, loan documents are prepared for signature.

Step 7: Prepare the loan documents. A loan signing may be scheduled after this step has been completed.

Step 8: Signing the loan documents. The loan signing occurs as soon as escrow receives the instructions from the lender and the loan documents.

Step 9: Bank Funding. Loan is funded after the lender receives signed loan documents from escrow and escrow confirms all requirements to close the loan have been met by the Applicant and Seller.

The 10th step involves recording. When a business is acquired along with the purchase of real estate, recording is the process of formalizing the transfer of all assets of the business by recording deeds of trust with the appropriate municipality.

Step 11: Close the escrow. Upon the closing of escrow, the applicant takes possession of the property when escrow notifies all parties via email that the bank funds have been disbursed. This is to ensure that the transaction is complete and closed.

You should be aware that SBA 504 loans require an additional 90 days for the SBA portion of the loan to be fully funded and closed. This will not delay the recording process or escrow close.

Generally, steps 8-11 can be completed within one to three days.

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