The Small Business Administration Has Created SBA Express Loans To Help Shorten The Waiting Time To Receive Funds
The Small Business Administration (SBA) offers loan programs to fund small businesses nationwide. They often have lower rates than many alternative lenders and even some banks. However, they can take weeks or months to fund. Now, the SBA has created SBA Express Loans To help shorten waiting times.
The SBA Express Loans program helps to significantly shorten the waiting time. Unlike with other SBA loans, lenders don’t have to get direct SBA approval for Express loans. This can significantly speed up the lending process. The Express program is great for business that needs a fast loan but wants to avoid the higher cost of working with an online or lender.
What is an SBA Express loan?
An SBA Express loan is a working capital loan of $500,000 designed for small businesses. It is part of the 7(a) loan program. Express loans are faster business loans that can be funded within a few weeks compared to 7(a) program loans.
Because Express loans don’t require direct SBA approval, lenders can follow their normal process for evaluating the loan. This streamlined process helps small businesses get approved for this loan more quickly than other SBA loans.
The amount you can borrow is limited, but you can use your funding for a variety of expenses, including working capital, expansion, equipment and debt refinancing. The amount the SBA guarantees is lower than its normal 7(a) loans. This also only affects the lender’s decision-making for approving the loan. But for businesses that only need a small amount, they can be a handy way to get quick funding.
Types of SBA Express loans
Both SBA Express loans and SBA Export Express loans fall under the larger 7(a) loan program. They allow businesses to borrow the same amounts for similar rates and terms — but Export Express loans have larger SBA guarantees and are meant specifically for businesses that export products.
| Loan amounts | Interest rates | Loan terms | Maximum SBA guarantee | |
|---|---|---|---|---|
| SBA Express loan | $500,000 | 11.50% to 16.50% | Up to 10 years for term loans or lines of credit; 25 years for property purchases or improvements | 50% |
| SBA Export Express loan | $500,000 | 11.50% to 16.50% | Up to 10 years for term loans, up to 7 years for lines of credit | 90% for loans of $350,000 or less 75% for loans over $350,000 |
SBA Express loan
An SBA Express loan is similar to a standard 7(a) loan. While your business is limited to just $500,000 rather than the usual $5 million, the streamlined SBA approval time makes it ideal if your business needs faster funding.
And like 7(a) loans, interest rates can be variable or fixed based on the Prime rate plus a percentage. Rates are currently between 11.50 percent and 16.50 percent. Exact rates vary depending on the amount of the loan and the type of interest rate charged.
SBA Export Express loan
The Export Express loan is slightly different. They are only available for businesses that export products outside the U.S. So, while your business will have access to similar terms as an Express loan or 7(a) loan, it must meet the additional requirement of being involved in exports. Like the Express loan, the lender doesn’t need direct SBA approval and can use their usual processes for approving the loan.
SBA Express loan requirements
Since the SBA Express loan program falls under the 7(a) loan program, your business must meet the same minimum requirements to qualify.
- For-profit. Businesses must operate for profit in the U.S. or U.S. territories.
Business size. The business must be defined as a small business, outlined in the SBA size requirements by industry. - Other funding. Your business must have already applied for other loans and used other business or personal assets to qualify.
- Other requirements — like minimum annual revenue, time in business and credit score — will depend on the lender you work with. In most cases, you will need to provide proof of steady cash flow and have a personal or business credit score in the good to excellent range.
The SBA doesn’t require lenders to take collateral for loans of $50,000 or less. For higher loan amounts, lenders can use their usual policies for collateral, but can’t disapprove a loan due to lack of collateral.
Pros and cons of SBA Express loans
While SBA Express and Export Express loans are some of the faster options on the market, they are still difficult to qualify for and limit how much your business can borrow.
Pros
- Response time. Lenders don’t need the SBA to directly review the loan before approval. They are free to approve the loan using their usual processes, often leading to approvals that take a few weeks or less. This is significantly quicker than the weeks- or months-long waiting period for standard 7(a) or 504 loans.
- Lines and loans available. Businesses can choose between a line of credit with a seven- to 10-year maturity or a term loan that lasts up to 10 years.
- Variety of lender options. The SBA certifies a variety of lenders, including large banks and online lenders, that work in the alternative finance space.
Cons
- Smaller loan amounts. Express and Export Express loans have a quick response time but limit how much your business can borrow to $500,000.
- Down payment required. Like other loans, your business may need to make a down payment, such as 10 percent to 30 percent of the loan amount.
- Requirements set by the lender. The SBA has a few basic requirements businesses will need to meet, but most eligibility criteria are set by the lender, not the SBA. Lenders often want to see a moderate to strong financial profile when approving these loans.