What Is an SBA Express Loan and How Do I Apply?

The SBA Express loan is part of the U.S. Small Business Administration’s (SBA) 7(a) small business loan program. SBA 7(a) loans are the agency’s main method of financially supporting small businesses. For businesses that have tried and failed to receive funding elsewhere, the SBA Express Loan is a helpful option.

Let’s review the finer details of the express loan process so you can better assess whether it’s the right option for your business.

What is an SBA Express loan?

An SBA Express loan is a streamlined business financing option offered by the SBA to provide small businesses with quick access to funds. With a maximum loan amount of $500,000, it aims to expedite the approval process, typically responding within 36 hours of application. However, the shorter approval times come with higher risk, and the SBA only guarantees 50% of the loaned amount.

You’ll have loan options as well, with the ability to take out two types of loans:

  • Term Loan: A business loan where a fixed amount is borrowed with repayment terms of regular monthly payments spread over a predetermined time. It’s typically used for long-term investments like purchasing equipment or real estate.
  • Line of Credit: A flexible borrowing arrangement in which a lender provides access to a specified amount of funds that a business can draw upon as needed, similar to a business credit card. Interest is only charged on the amount borrowed, commonly used for short-term working capital needs or managing cash flow fluctuations.

While offering flexible terms and competitive interest rates, it assists small businesses in meeting various financial needs, including working capital, equipment purchase, and debt refinancing.

Where do I get an SBA Express loan?

The SBA is not a financial institution and cannot lend money to businesses directly. Instead, the agency connects small business owners to SBA-approved lenders, guarantees the loans, or backs them if the borrowers cannot repay them.

The SBA Express Lenders (aka preferred lenders) complete the loan underwriting process and manage the payback. They include various financial institutions such as banks, credit unions, and non-bank lenders.

What can SBA Express loans be used for?

Unlike a disaster loan, the 7(a) loan program is not just available for small businesses during emergencies. These loans can be used whenever there’s a need for additional funds (and they can be multipurpose loans, too), so long as they’re used for business purposes, such as:

  • Providing long-term or short-term working capital
  • Purchasing real estate, equipment, furniture, machinery, supplies, and fixtures
  • Construction and/or renovation costs
  • Establishing, acquiring, or expanding a business
  • Refinancing business debt (so long as the lender and the SBA will not sustain a loss)
  • Complete or partial changes of ownership (note: the latter became an acceptable use in 2023 with certain requirements, such as that both the business and the individual owner(s) who are acquiring ownership must be co-borrowers on the SBA loan)

Express Loans can’t be used for:

  • Reimbursing an owner for any personal investments toward the business
  • Repaying delinquent withholding taxes
  • Affecting any change that will not have a positive effect on the business
  • Any purpose the SBA does not deem a “sound business purpose”

Who is eligible?

Businesses applying for an SBA Express Loan must meet the following eligibility requirements:

  • Operate for profit and within the USA
  • Be an existing business in operation for at least two years
  • Aim for a minimum credit score of no less than 620 to 640, though it can vary based on the lender, so the higher your score, the better for qualifying for a loan or securing better rates
  • Qualify as a small business by SBA standards (in most cases, 500 employees or fewer)
  • Demonstrate a need for financing (e.g., can’t get a loan with reasonable terms from non-government sources)
  • Not be able to get credit elsewhere, and the lender will need to document why
  • Must show that funds will be used for sound business purposes and that you can repay the loan
  • Cannot be delinquent on previous debts to the government unless waived by SBA for a good cause

Several businesses are also ineligible for Express loan financing, including but not limited to:

  • Financial institutions that engage in lending
  • Political or religious organizations
  • Nonprofit companies
  • Life insurance companies
  • Government-owned entities (except those owned or controlled by Native American tribes)
  • Speculative businesses (e.g., stocks or real estate)
  • Firms engaged in pyramid sale distribution plans
  • Businesses that make more than one-third of their gross annual revenue from legal gambling activities
  • Businesses that promote or partake in any illegal activities

Express Loans are also unavailable if the business can reasonably access financing through other means. For example, if a business owner is able to use personal funds for business needs without experiencing financial hardship, Express Loans are not an option.

Do I need to make a down payment and provide collateral for an SBA Express loan?

Unlike some other types of 7(a) loans that require a 10 percent down payment, the Express loan doesn’t include that requirement. However, your lender may still need you to provide it, and depending on the lender’s rules, the amount of your down payment could be similar to the down payments they require for their private sector loans.

In the past, collateral wasn’t required for loans of $25,000 and less, but as of August 2023, it’s now not required for loans that are $50,000 and under (with personal guarantees remaining). If a loan is more than $50,000, the lender can use their collateral policies to determine requirements, but a lack of collateral alone can’t be used to decline a loan.

Terms and conditions

As stated above, to allow for the 36-hour turnaround time, the SBA will only guarantee 50% of the loan amount, which can go up to $500,000.

Due to the Express loan’s increased risk, the lender makes much of the decision-making around the loan terms, including eligibility, interest rate, and credit decisions. While lenders and borrowers can negotiate the interest rate, it may not exceed the SBA maximum. As of the end of May 2024, the maximum Express loan interest rates range from 12.75% to 14.75%, which includes the prime rate.

If you’re approved for SBA Express, you’ll receive your funds within 90 days, and the lender will have to pay a guaranty fee to the SBA within this timeframe. The lender could pass those charges onto you as the borrower. Note that while you can use the loan to help pay for those fees, the first loan disbursement (i.e, the first set of funds transferred to you through the loan) can’t completely be used to pay the guaranty fee.

The fee is a percentage of the amount guaranteed by the SBA, or no more than 2% for the guaranteed portion of loan amounts $150,000 and under, and no more than 3% on the guaranteed portion of loan amounts more than $150,000 but no more than $700,000.

Can I refinance an SBA Express loan?

Yes, it’s possible to refinance an SBA Express loan under certain circumstances. However, the process is quite difficult, and you’ll pay refinancing fees.

That’s why it’s usually only a good idea to refinance if you have a high-interest loan and are likely to get a much lower interest rate.

How do I apply for an SBA Express loan?

Use the SBA’s 7(a) lender search tool to connect with a lender that provides 7(a) loans. From there, the SBA Express loan application process is heavily up to the lenders’ discretion, but it typically requires:

  • Borrower application forms (including SBA Form 1919)
  • A business plan and your plans for the loan funds
  • Personal history statement (if the applicant has a criminal history)
  • Agreement of compliance (if you plan to use the funds for construction)
  • Financial statements such as a profit and loss statement
  • Financial projections
  • A list of owners and affiliations
  • All business licenses and certifications
  • Any previous loan applications
  • Signed tax return documentation for the owner(s) and the business dating back at least 3 years
  • Resumes of all owners with 20% or more ownership of the business
  • Any business-related leases

Prepare to get your application started with the SBA’s checklist for all 7(a) loans.

Other SBA 7(a) loans

In addition to the Express loan, the SBA Export Express Loan Program provides a higher guarantee to mitigate international credit risk when developing an export part of a business. It’s 90% for loans of $350,000 or less and 75% for loans more than $350,000 with a maximum loan amount of $500,000.

You might also want to consider the standard 7(a) loan, which offers borrowers up to $5 million. The SBA guarantees these loans at 75%. A variation of that loan, the 7(a) Small loan grants borrowers up to $500,000 like the Express loan, but for these, the SBA guarantees these loans at 85% for loans up to $150,000 and at 75% for loans greater than $150,000. Unlike the SBA Express loan, the standard and Small 7(a) loans have longer application processes and are typically processed by the SBA in up to 10 business days.

Is it hard to get an SBA Express loan?

While SBA Express loans aim to simplify the borrowing process for small businesses, approval still depends on factors such as credit history, business viability, and meeting other eligibility criteria. Compared to traditional express loans, SBA Express Loans often have stricter requirements, as applicants need to demonstrate a stronger ability to repay the loan. Working with an experienced lender familiar with SBA processes can help navigate the application and increase the chances of approval.

SBA Express loan alternatives

Alternatives to an SBA Express loan include

  • Traditional bank loans
  • SBA microloans
  • Business lines of credit
  • Equipment financing
  • Real estate loans
  • Invoice financing
  • Merchant cash advances
  • Crowdfunding
  • Peer-to-peer lending
  • Angel investors
  • Venture capital
  • Grants from government or private organizations

Each option has advantages and considerations, so it’s essential to assess your business’s specific needs and explore the terms and requirements of each alternative before making a decision.

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