Of all the questions that get asked by borrowers and banks regarding the SBA 504 program, this one probably ranks as the highest – “How soon will my loan get approved?” And unfortunately, it is the hardest question to answer since there are so many variables that can affect the timing.
But to start things off, the SBA 504 loan is a dual-approval loan. First, the loan needs to be approved by the CDC, in this case SEDA-COG. This is no different than getting a loan approved by a bank through their loan committee or in-house approval process. Second, once approved by SEDA-COG, the SBA needs to approve the loan through the submission of an application.
The timing of the first approval typically mirrors that of the bank since the information needed to complete our credit memo is typically the same information needed by the bank: business plan (if applicable), company/owner background information, financials (both personal and business), project cost estimates, etc. Also, SEDA-COG, like most banks, can get a loan request reviewed by our loan committee on a weekly basis once the credit memo is completed. So the first variable is how long it takes the borrower to get us the required information for the credit memo.
Once the loan has been approved by our loan committee, we can begin the application process. While some of the application items include what was collected for the credit memo, there are other forms and documentation that might be needed, depending on the scope of the project and the business itself. For example, an appraisal might need to be completed and included with the application. Or a sales agreement might need to be drafted or specific project costs need to be documented through bids or quotes, rather than the initial estimates. Or in the case of a franchise operation, franchise documentation that might need to be approved by the SBA prior to the application submission. This is the second variable that for the most part is on the borrower to provide and can be done very quickly or might take some time to compile.
The last stage of the approval is the time needed by the SBA to review the loan application. For most projects, the response from the SBA is within 10 business days. However, if they have any questions or issues, the loan is “screened out” until we are able to respond to the SBA. This also involves the cooperation from the borrower.
While I would love to be able to tell a borrower and a bank that we can get a loan approved for them in 30-45 days, that’s not always the case. Have we been able to get a loan approved from the completion of the credit memo to final SBA approval in 30 days? Yes we have. Has it also taken 6 months or more to get final approval? Unfortunately that answer is yes as well. It all depends on the cooperation from the borrower and the complexity of the loan request. The overall documentation needed for an SBA 504 loan is typically not much more than what a borrower would have to provide to get a traditional bank loan.
The main thing to keep in mind is that SEDA-COG is dedicated to moving the loan approval process along as fast as possible given that we have all of the information that the SBA requires and that we are always willing to assist in any way in helping the borrower complete the loan approval process.