Here’s a quick look at sba express loans
SBA Express Loans
SBA Express loans follow the same general format as other SBA 7a loans. You borrow through a private lender, like a bank or credit union. The government guarantees repayment of part of your SBA loan balance, reducing the risk for the lender. As a result, you may have a better chance of qualifying, and with better business loan terms, than if you applied without government support.
The regular SBA Express loan program is available for any for-profit business that meets the SBA’s standards for being a small business. You can borrow up to $500,000 and use the funds for any spending that qualifies under the SBA 7a loan program including:
- Real estate
- Working capital needs like salaries and inventory
- Refinance existing debt
- Set up a line of credit
SBA Express loan terms can be up to 25 years for buying real estate, 10 years for other business spending like working capital and equipment, and seven years for lines of credit (with the option for the lender to approve maturity extensions.)
The SBA Express maximum loan amount of $500,000 is significantly lower than what you could borrow through standard 7a loans, which go up to $5 million. The limits are lower because the SBA processes Express loans more quickly. The agency reviews your SBA loan application within 36 hours, versus up to 10 days for standard 7a loans.
The SBA speeds up the Express loan approval process by passing on more of the decisions to the actual lender. When you apply, you primarily use procedures and forms provided by the lender, along with SBA Form 1919. On this government form, you list information such as who owns your business, your contact info, and your past history with government loans.
The lender also reviews your credit. The lender can follow their own collateral requirements for business loans up to $350,000 and does not have to take collateral for loans below $25,000. For other 7a loans, the lender would need to follow rules and borrower requirements set by the SBA. Finally, it is the lender who ultimately decides whether you are eligible for the business loan, not the SBA like with other 7a loan types.
Note that while the SBA only takes 36 hours for their review, the lender will also run your application through their own approval process. How long this takes depends on the lender, but not having to confirm everything with the SBA typically speeds things up. For example, if a lender takes 60 to 90 days to close a standard 7a loan, they might close within 30 to 60 days with an Express loan thanks to the time saved.
Since the Small Business Administration spends less time reviewing the strength of your application for express loans, they give a smaller SBA loan guaranty. The government only guarantees up to 50% of Express loans, versus up to 85% of standard 7a loans. As a result, the lender would lose more money if you didn’t pay back the debt. The lender could charge a higher interest rate to make up for this extra risk (subject to the SBA’s maximum interest rate).