SBA 7(a) Business Acquisition Loan Application From Start To Funding

The Million Dollar Question

The most frequently asked question I receive by far is how long does the loan application process take to complete from start to finish. The quick answer is 45 – 60 days. The honest answer is it takes as long as necessary to complete all steps in the process.

The next logical question is what are the steps. Here is a list of each step in order with an explanation.

The Clock Starts

Before I begin, I want to emphasize the timeline starts from the day the lender receives the monetary Deposit, usually $2,500 or $5,000 and the signed Letter of Interest or Term Sheet.

Steps 1 – 11

Step 1: Loan Application Needs List. This needs list is sent to the Applicant by the Lender in preparation for underwriting. Included are General Application Forms and SBA Forms 1919, 413 and 912 if necessary. It typically takes 2 – 4 days for the lender to generate this needs list from receipt of the monetary Deposit and signed Letter of Interest.

Step 2: Underwriting The amount of time to underwrite the loan is 1 – 3 weeks depending on the lender’s pipeline density, available underwriters and support resources and outstanding information required by the underwriter to render a decision.

Step 3: Credit Decision The credit decision is announced upon completion of underwriting or the conclusion of ”loan committee.” Some lenders shepherd loan requests through individual underwriters in an underwriting loan center. Other lenders maintain a decision making body referred to as “loan committee.” It takes 5 – 10 days for an underwriter to review a loan application and either return to the applicant with questions or a credit decision, meaning the loan is either approved or declined. Loan committees decide a loan in the committee meeting which is typically one day per week or every other week.

Step 4: Commitment Letter The commitment Letter outlines conditions required to close the loan and is sent to the Applicant 2 – 4 days after loan approval. This step begins the process of ordering third party reports and the collection of closing documents.

Step 5: Third Party Reports & Closing Documents A business valuation is ordered by the lender to be performed by an SBA approved third party valuation company. The valuation may take 2 – 3 weeks to complete with an additional 2 – 5 business days for lender review. If real estate is included in the business acquisition, a real estate appraisal is also ordered which also takes 2 – 3 weeks with an additional 2 – 5 business days for lender review.

Step 6: Quality Control / File Audit Once all closing documents and third party reports have been completed and approved the lender conducts a final review of all required documents and reports necessary to close the loan which takes 2-5 business days. The lender orders loan documents to be prepared for signature when the file is deemed complete.

Step 7: Loan Document Preparation This step takes 1-3 business days before loan signing may be scheduled.

Step 8: Loan Document Signing Loan signing takes place immediately after escrow receives lender instructions and loan documents.

Step 9: Bank Funding Loan is funded after the lender receives signed loan documents from escrow and escrow confirms all requirements to close the loan have been met by the Applicant and Seller.

Step 10: Recording Recording is the process of formally documenting the transfer of all assets of the business and recording deeds of trust if real estate is included in the business acquisition.

Step 11: Close of Escrow Escrow officially closes and the Applicant takes possession of property when escrow notifies all parties via email bank funds have been disbursed and escrow is complete and closed.

Steps 8-11 are typically completed in 1-3 business days.