Getting started with a small business can be very challenging, especially from a financial standpoint. Taking out a loan is one of the quickest ways to get access to the money you need to fund your business endeavors. However, you need to be careful when it comes to what kind of loan you take out.
Different types of loans have their own requirements, and some are better for you in the long run than others. In this article, we’ll talk specifically about SBA Express Business Loans and how they can help your business.
If you’re searching for an SBA loan up to $350K and want to get funded fast, we recommend SmartBiz. They usually help companies that have been in business for 2 or more years and have a credit score of 680 or higher. Their entire application can be filled out online. You can get prequalified in moments and get funded in just 3-4 weeks, versus the typical 2-3 months it takes through the SBA directly.
What is an SBA Business Loan?
The SBA, or Small Business Administration, is a United States government organization that provides small businesses of all types around the country with the resources they need to achieve their goals and be successful in their communities.
There are so many benefits to communities for funding small businesses and making them a successful part of the area. This has been particularly true recently with the rise of larger corporate chains in major cities, which makes it difficult for smaller businesses to keep up.
The SBA makes it easier for entrepreneurs to take advantage of great opportunities in their communities.
SBA offers a variety of loan options to give business owners the capital they need to commence operations, expand their business, or achieve financial stability.
Although there are many different types of loans available, in this article we’ll be discussing the Express option (referred to by SBA as Export Express), and we’ll also be comparing it to the traditional 7a loan option, which is similar in some respects.
The Express program provides lenders with the ability to offer small businesses in their communities a variety of term loans and credit lines. These loan options range from $25,000 to $350,000, depending on the lender. This program offers tons of benefits for both business owners and lending institutions alike.
How does an SBA Express Business Loan Work?
SBA Express was created to give business owners a way to get a loan quickly and easily. An SBA Express loan has a turnaround time of roughly 36 hours for approval by the SBA and the lender. They are a great option if you need quick capital to take advantage of a new development or expansion opportunity.
Many of the other decisions regarding the loan are left up to the individual lender. For example, they are able to make their own decisions regarding the applicant’s credit evaluation. They also use many of their own forms and procedures, as well as their own collateral requirements for most loans.
The rates for an SBA express loan are highly negotiable. The lender and borrower have some leeway to negotiate depending on the current prime rates, which are published in the Wall Street Journal. Lenders are not allowed to charge more than 6.5 percent over the base rate for loans under $50,000 and no more than 4.5 percent over the base rate for loans above that figure. These loans also permit up to seven years of revolving credit line, which may be extended under some circumstances.
The SBA Express loans are generally similar to the traditional SBA 7a loans. They are regulated using many of the same procedures as traditional SBA loans, but have unique benefits that attract different kinds of customers.
What are the Benefits of an SBA Express Loan?
There are many benefits to using an SBA Express loan to fund your business. Although there are some downsides compared to using a 7a loan, the benefits of taking out an Express loan make it worth it in many circumstances. These benefits include:
- SBA Express loans have a very quick turnaround time. The applications are reviewed within 36 hours. If you qualify, you can get your money very shortly thereafter. By taking out an SBA Express loan, you can take on new business opportunities very quickly.
- SBA Express loans are available through local lenders. This can be a downside in some cases, as not every town is necessarily going to have a local Express lender. However, it can be a big benefit in some cases. The lender uses many of their own procedures when putting together an Express loan. This may have positive outcomes for you, particularly if you are already a customer of that lender and know them well.
What are the Downsides of SBA Express Loans?
It is important to note that there are many downsides to taking out SBA Express loans as opposed to other types of loans, such as a traditional 7a loan. These downsides include:
- The maximum amount of money you can get using an Express loan is much lower than what you would get with a 7a loan. The most money you would be able to get access to through an Express loan is $350,000, while a 7a loan allows you to take out up to $5,000,000.
- The rates for an Express loan are much higher than the rates for a 7a loan. Express loans can have rates as high as 6.5 percent above prime, while a 7a loan can only have rates as high as 2.5 percent above prime. However, since banks can set their own rates with an Express loan, you may not actually end up paying this much if you negotiate with them.
- You cannot get an Express loan from as many sources as you can get a 7a loan. Express loans are provided through local lenders that have been approved by the SBA. This means that you may not be able to get an Express loan if you don’t have a provider nearby. You also cannot use online tools to get an Express loan in most cases.
- The guarantee rate for an Express loan is lower than it is for a traditional SBA loan. The guarantee rate for a 7a loan is as high as 90 percent in some cases, while it is only 50 percent for an Express loan.
How do I get an Express Loan?
If you decide you are interested in getting an SBA Express loan, you will need to find a local provider who offers them. Not all lenders are certified to participate as SBA Express lenders. In order for a lender to offer this service, they must qualify with the SBA. A lender is eligible to become an SBA Express loan provider if they:
- Are currently an SBA loan provider, and they meet specific performance standards with their existing portfolio.
- They are a non-SBA lender who makes a reasonable number of existing loans under the amount of $50,000.
The SBA does not have any existing volume requirements for lenders who want to offer SBA loans to their clients. To find out which lenders in your community offer SBA Express loans, you will need to contact them directly.
Many people aren’t aware of the criteria surrounding SBA loans, so it is important to become familiar with them before you apply. If you are unsure about whether you will qualify, it may help to talk to your SBA Express lender beforehand to get more detail. Here are some of the basic factors that are taken into account when you apply for an SBA loan.
- The SBA cannot guarantee funding to all small businesses – they just don’t have the volume to do that. Because of this, the organization wants to offer loans to businesses that have already been turned down for private financing opportunities. You will need to show that you have already applied on your own for a loan, without the help of the SBA, and been turned down.
- You will need to meet your lender’s individual qualifications. With an Express loan, you will be working with your local lender, so you will need to meet their general requirements regarding credit, collateral, and other factors.
- You will need to qualify as a small business with the organization. Although you may operate as a small business, you will need to prove that your volume levels do indeed place you in that category. This is defined using a number of factors, including number of employees and the amount of sales you make each year.
Generally, your business will need to be in relatively good standing in terms of credit. Although the Express loan program is a great resource, you still won’t be able to get the money if you have a history of unreliable credit. This is particularly important with the Express program, as the guarantee of loan rate is only 50 percent, compared to much higher numbers for other types of SBA loans.
There are a few things that you’ll need to pull together before going in to apply for your SBA Express loan. You’ll need to compile paperwork about your business and your financial history. For example, you’ll likely need a report of your credit history and financial statements from your business. You’ll need to prepare to give background on your company’s finances. This can be quite difficult, because in order to get an SBA loan, you need to have been turned down by other lenders. However, you’ll also still need to prove that you are responsible with your money.
You should also come in a with a business plan detailing where you’ll want to take your company next with the money you receive. The more information you give, the better chances you’ll have of being granted the loan that you need.
Once you’ve talked with your lender and presented the necessary information to receive a loan, you’ll need to fill out their loan paperwork. Ideally, you should be working with a lender who has extensive experience putting together SBA loan paperwork. They can walk you through each step of the package and help you understand exactly what you are doing. Once you are done with the application and it has been submitted, you will be notified within 36 hours if you qualify or not.
The reason the SBA Express loan can be granted so quickly is because of the SBA’s partnership with local lenders. The SBA lets local lenders set their own expectations regarding who should receive a loan. Because of this, all the SBA has to do is a quick review of the paperwork instead of in-depth analysis to determine whether or not you are going to get the loan. Because of this, your lender will likely be able to tell you when you apply what your chances are of actually getting a loan depending on your personal circumstances.
Alternatives to the SBA Express Loan
Because of the downsides that are associated with SBA Express loans, many people search for another option to help them get the money they need quickly. There are some alternatives out there to getting an SBA loan that don’t have the high fees and lending limits that are associated with the Express program.
We recommend using SmartBiz, an online lending program, to help get an SBA loan online. The site allows you to apply for many different types of SBA loans online, including a traditional 7a loan. SmartBiz allows you to get a traditional 7a loan much quicker and more affordably than you would through a local lender. This is because they streamline the process to make it much easier for consumers.
Applying for an SBA loan through SmartBiz is quite simple. They have an online application process that you can complete quickly if you already have the necessary documents prepared. SmartBiz is also able to get your money to you much faster than traditional lenders do – sometimes as quickly as a week, and almost always within 30 days. This is much faster than normal funding times, which can last as long as three months. Even with an Express loan, there are instances where you may have to wait several months to get your money after you are approved.
SmartBiz also offers very competitive rates. They charge a maximum of 7.5 percent APR, although most loans have rates that are lower than that. They also charge fewer processing fees than traditional lenders do, so you get more of your loan back to use for your business.
SmartBiz is designed to help you fund the business projects that are important to you, using the solutions that the SBA has to offer. In particular, they offer three main types of loans. These are:
- Commercial Real Estate loans, which are intended to help you secure the space you need to run your business. To qualify for this, you must use the majority of your commercial real estate for business use, you must have been in business for three years or more, you must have a credit score of 675 or higher, and you must be able to prove you have the steady income to make your loan payments.
- Debt Refinance loans, which help you pay off your existing debt to do more with your business. For this loan, you need to have been in business for at least two years and have a credit score of over 650.
- Working Capital loans, which can fund many of the daily expenses that your business encounters so you can take advantage of new opportunities and grow quickly. Some of the things you can do with a working capital loan include buying new equipment, investing in marketing strategies, hiring employees, and more. This loan has the same requirements as the debt refinancing loan. SmartBiz as a good alternative to an SBA Express loan for quick and easy processing. SmartBiz makes it much easier to apply for an SBA loan using their easy online application process, and the requirements are very straightforward. However, an SBA Express loan may be a better alternative in some cases if you need to get the money very, very quickly and you are okay with the higher rates involved. Which loan you choose will be dependent on your businesses’ personal needs.