There are many types of SBA loans available for different types of small businesses and different purposes. The type of loan you apply for will depend on what you need it for and your business’s qualifications, such as time in business, credit scores and business financials. Also, SBA loans are guaranteed through the SBA but are administered by SBA-approved lenders who manage applications, approvals and payouts.
SBA loans can take longer to process than other loans because the application process is extremely thorough and they’re very popular loan types. Most small businesses are willing to wait because of how much money they can get from the loan as well as the attractive repayment terms and low interest rates.
Below are some of the most common SBA loan types and what they can be used for, as well as their typical approval wait times.
7(a) loans
As the most popular SBA loan type, SBA 7(a) loans can be used for a variety of purposes, including working capital, purchasing business equipment or even refinancing other debt. You can borrow up to $5 million with an SBA 7(a) loan, although most small businesses qualify for less money.
After applying for an SBA 7(a) loan, you can expect to wait 60-90 days for approval. This wait time depends on how thorough your application was, whether the lender has any follow-up questions or how many other loan applications the lender has to go through.
504/CDC loans
SBA 504/CDC loans are different from other SBA loans in a few ways. First, they can only be used for specific purposes such as to buy commercial real estate, pay for improvements on commercial property or to make major equipment purchases. Secondly, they’re funded through certified development companies (CDCs), so the borrower has to get approval from both the CDC and the SBA.
It can take 30-45 days for the SBA to approve a 504/CDC loan, although it can take longer for the CDC to approve the loan. In fact, some borrowers have had to wait up to six months to get their 504/CDC loans approved. For the most part, these loans are usually worth the wait: Borrowers can get up to $5.5 million for projects with an SBA 504/CDC loan, but they will have to prove that their project will create jobs or otherwise contribute to the local community.
Microloans
SBA microloans are meant for smaller projects of $50,000 or less. They’re usually processed much faster than other SBA loans, and they tend to have fewer or less strict requirements. These loans are very popular among small businesses that are owned by minorities, women, veterans and low-income business owners.
It can take up to three months for an SBA microloan to be approved, although most borrowers will see approvals within a month.
Disaster loans
SBA Disaster loans are issued by the SBA during emergencies and are meant for businesses who have experienced physical or economic damage due to a declared disaster. These are not loans you can apply for everyday, and they must be used for specific disaster-related purposes, such as repairing property or equipment or paying employees if your business had to be shut down.
Because they’re meant to be used during periods of disaster, these SBA are usually approved much more quickly than other SBA loans. SBA-approved lenders try their best to get loans approved within three weeks, as long as the application is complete and they don’t require any further documentation from the borrower.
