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.
About the author
Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 16 years: combining business training programs with one-on-one mentoring. Marj is currently a financial advisor for Florida SBDC at FIU. She was Chair of SCORE Miami Dade from 2010 to 2014. She also serves as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has facilitated workshops under the auspices of Miami Bayside Foundation, Little Haiti Cultural Center and .local banks. She commenced her career as a real estate investment banker in New York and Miami..She uses these long term relationships to assist her clients in accessing capital. She knows both the process and the people and has assisted in providing financing for hundreds of businesses in Miami Dade.