Step 3. Package the Loan
For an existing business you should have all the historical financial information available before you start the loan process.
You can make some inquiries to be certain your business meets the loan criteria of the lender, but don’t start the application process until you are ready to provide the required documents and have the time to go through all the following up documents that will be requested.
For a start up enterprise you will have to prepare cash flow projections that will reflect anticipated profit and loss for the first three years of operation. Start-up lenders with the best lending rates rely heavily on personal credit scores.
All applicants will have to prepare a personal financial statement.
Step 4. Start the Loan Application Process.
The length of time for the loan approval may vary slightly with the type of loan that is being sought and the collateral that will support the loan request. In most cases the loan approval process should not take more than 30 days.
If the loan requires an SBA guarantee, there are additional underwriting criteria and therefore the approval process can be longer. You should make certain the lender has “Preferred” SBA status. The preferred status expedites the SBA approval process. There are many SBA programs available to both start ups and existing businesses.
Any loan involving real estate will require an inspection, an appraisal, perhaps an environmental report. All these underwriting requirements add to the processing time.
If you are working with an on-line lender you may be able to close a loan in less than two weeks. (I am not referring to payday lenders that will close in 24 or 48 hours but will charge high interest rates.)
Once a loan is approved and all parties agree to the terms and conditions, the documents are passed on to a loan closing department or third party lawyers.
The closing process can take another business week if all the documents have been assembled, and if the legal department has a normal workload.
The end of the calendar year is always the worst time of the year to close a loan because the closers have a heavy case load.
Stay tuned for more Small business loans and finance questions.
Good luck.
Related articles:
Part one: Small Business Financial Q&A’s by Financial Loan Expert
Real Scenario- When a Growing Small Business Needs Funding
3 Questions To Optimize Your Financial Performance
Breaking Down the Set Up of Small Business Financial Records