SBA Express Loan: What Is It and How Does It Work?
If you’re starting a small business, an SBA Express loan could get you the startup capital you need with a relatively quick turnaround time.
The Small Business Administration (SBA) guarantees up to 50% of these loans, which are funded by third-party lenders. Each lender may have its own SBA Express loan requirements, so it’s important to consider your options before choosing your best loan.
What is an SBA Express loan?
An SBA Express loan is a speedier version of the SBA’s standard 7(a) loan. It comes with a lower maximum loan amount than the standard 7(a) loan. However, the SBA’s turnaround with an Express Loan can be within 36 hours, rather than five to 10 business days with an SBA 7(a) loan.
But this doesn’t necessarily mean it’ll be fast to get from lender selection to funding, even if you’ve met all the SBA Express loan requirements. The SBA doesn’t enforce strict guidelines on how quickly your lender needs to return a decision on a loan application or disburse funds. So depending on your lender, you may still be waiting 25 to 60 days for SBA Express loan funds to be deposited into your account.
Here are the basics you need to know about SBA Express loans:
Maximum loan amount | $500,000 |
Maximum SBA guarantee | 50% |
Interest rates for fixed-rate loans | Capped at 12.50% to 15.50%
15.5% for loans $25,000 or less
14.5% for loans $25,001 to $50,000 13.5% for loans $50,001 to $250,000 12.5% for loans above $250,000 Some borrowers may qualify for lower rates. Based on the current prime rate of 7.50% + a rate maximum set by the SBA. |
Interest rates for variable-rate loans | Capped at 10.50% to 14.00%
14% for loans $50,000 or less
13.5% for loans $50,001 to $250,000 12% for loans $250,001 to $350,000 10.5% for loans above $350,000 Some borrowers may qualify for lower rates. Based on the current prime rate of 7.50% + a rate maximum set by the SBA. |
Eligibility decision | Made by lender |
SBA turnaround time | Within 36 hours |
It’s important to note that the SBA doesn’t issue Express Loans directly to small business owners. Instead, it reduces the risk for lenders by guaranteeing a percentage of the loan. This means the SBA — with the backing of the federal government — makes a guarantee that it’ll repay a portion of the borrower’s loan if the borrower defaults on the loan.
With SBA 7(a) loans, lenders are guaranteed from 50% to 90% of the loan amount. With this backing, banks and other financial institutions may be more willing to provide small business loans to borrowers who might not otherwise qualify.
SBA Express loan interest rates
The SBA caps the interest rates lenders can charge on SBA loans. While lenders and borrowers can negotiate interest rates on Express loans, the SBA doesn’t allow lenders to charge more than its maximum rate.
The SBA calculates the maximum by using the benchmark prime rate, which is tied to the federal funds rate set by the Federal Reserve. The current prime rate is 7.50%. The maximum interest rate on variable-rate SBA Express loans of $50,000 or less is 14.00%. Higher loan amounts have lower interest-rate caps.
Check out our SBA loan calculator to see what your monthly payments might look like.
SBA Express loan fees
The SBA charges a fee on the guaranteed portion of the loan. This fee is based on the loan amount and repayment term.
Although the guarantee fee is charged to the lender, many lenders pass the fee on to borrowers. The fee you could be expected to pay is as follows:
- Short-term loans (12 months or less): 0.25% of the guaranteed portion
- $150,000 or less: 2% of the guaranteed portion (lender can retain 25% of the fee)
- $150,001 to $700,000: 3% of the guaranteed portion
- $700,001 to $1 million: 3.5% of the guaranteed portion
The SBA does offer a break for qualified veterans and spouses, who are eligible for a 0% guarantee fee on SBA Express loans.
SBA Export Express loans
In addition to standard Express loans, the SBA also provides long-term loans and lines of credit for companies looking to establish or expand the export side of their business. Export Express loans typically take the same amount of time to process as SBA Express loans, but they provide a higher level of protection against international credit risk. SBA Export Express loans are available in amounts up to $500,000.
Differences between SBA Express loans and standard SBA 7(a) loans
SBA Express loan | Standard SBA 7(a) loan | |
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Maximum loan amount | $500,000 | $5,000,000 |
Maximum interest rate | Negotiable, but can’t exceed SBA maximum | Negotiable, but can’t exceed SBA maximum |
Collateral requirements |
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Maximum repayment terms |
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SBA Express loan requirements
Each lender can set its own SBA Express loan requirements. However, there are some standard parameters that every business must meet to qualify for the SBA Express loan program.
- Be a for-profit business: The business must be officially registered with state and local governments and be operating legally.
- Meet SBA size standards: SBA Express loans are only available to small businesses. The size standards represent the largest size a company may be to qualify as “small.” Size standards are typically based on average annual receipts or average number of employees. You can use the SBA’s size standards tool to check on eligibility.
- Do business in the U.S.: To be eligible for an SBA loan, the company must be physically located and operating in the U.S. or its territories.
- Have invested equity: The business owner must invest their own time or money into the business.
- Show the ability to repay the amount borrowed: You must be able to demonstrate that you can repay the loan with the profits from your business. Lenders typically look at your debt-to-income (DTI) ratio to evaluate your capacity to repay the loan.
- Exhaust financing options: You can’t get an SBA Express loan if you have other financing options available to you.
SBA business loan assistance is only available for applicants who fail to qualify for loans with reasonable terms from traditional lenders.
SBA lenders will confirm whether you meet this requirement by analyzing how your company’s collateral, time in business, annual revenue and other factors stack up alongside the minimum criteria set by conventional lenders.
SBA Express loan application process
Step 1: Make sure you qualify
Before talking to lenders, it’s a good idea to review the typical requirements for business loans you must meet to qualify. Here’s a checklist from the SBA:
- Have a business plan. Most lenders want to see a business plan when you apply for an SBA loan. The SBA offers tips on how to create a business plan.
- Know your desired loan amount and purpose. Be informed about how much you need and how you plan to use the money to help your business.
- Have good credit. Lenders will check your credit score to determine your credit risk and set interest rates. While the SBA doesn’t have a set minimum credit score, most lenders require a minimum credit score of 680 to get an SBA 7(a) or Express loan.
- Prepare financial projections. Lenders will want to see financial projections that show you’ve thought through how you’ll use the loan proceeds and how you’ll pay it back.
- Have assets that can be used as collateral. The SBA Express loan program doesn’t require collateral for loans up to $50,000. However, if you want to borrow more than that amount, you may need to use other assets to guarantee your loan. This can include accounts receivable, inventory, business equipment, real estate and even personal property of the business owner, such as your home or car.
- Demonstrate your industry experience. The SBA doesn’t require industry experience. However, if other aspects of your loan application aren’t strong, having firsthand knowledge of the industry can help your lender feel more confident about making the loan.
Step 2: Gather financial documents
In addition to documentation to support the criteria listed above, your lender may ask for:
- Personal background and financial statements via SBA Form 413
- Three years’ worth of business financial statements
- Copies of personal and business tax returns for the past three years
- Original business certificate or license
- Resumes for all business owners
- Real estate purchase agreements (when buying property with SBA loan proceeds)
You may need to gather additional financial documents depending on the lender.
Step 3: Choose a lender
The SBA’s eligible lender search tool can help you find participating SBA-approved lenders. You’ll need to answer questions about your business. Within two days, you’ll receive an email with the contact information of lenders who are interested in working with you on a loan.
You can also start your search on LendingTree, where you may be matched with up to five lenders depending on your creditworthiness.
Remember: The SBA doesn’t lend money directly to small business owners, so you’ll need to find an SBA Express lender to start the application process.
Step 4: Submit your application
Once you’ve selected a lender, you’ll need to complete an SBA loan application. The lender may provide this to you. If not, you can download SBA Form 1919 directly from the SBA website.
Each owner, partner, officer or director with at least 20% ownership in the business will need to complete this form. Once your loan application is complete, your lender will submit it to the SBA for approval.
Step 5: Wait for approval
The SBA Express loan program is designed for fast approvals. Once the lender submits your SBA Express loan application and supporting documentation, the SBA will respond to your application within 36 hours. You’ll then need to wait for the lender to disburse the funds.
Keep in mind that not all lenders will work quickly to submit the application — check lender reviews ahead of time to get an idea of what to expect.
SBA Express loans: Pros and cons
There are pros and cons of SBA Express loans you should consider when weighing your options.
Pros
- Quicker turnaround time than standard SBA 7(a) loans
- No collateral required if borrowing up to $50,000
- More flexibility and authority for lenders on loan approval
- Can negotiate interest rates, which are capped by SBA
Cons
- Typically not available to borrowers with poor or fair credit
- Usually requires personal guarantee from business owner
- Application requires extensive paperwork
- Time to funding may be longer than other non-SBA lending options
Alternatives to SBA Express loans
SBA loans are just one of the options small business owners have when seeking funding. You may be able to fund your business yourself, borrow money from friends or family or get a loan from a traditional lender. Here are a few alternative options you can consider:
- Fast business loans: If your top priority is speed, some online lenders offer quick business loans that can provide funding as soon as the same day you apply. Though this is a faster timeline than SBA Express loans, these loans often come with high interest rates, so they are best suited for businesses in time-sensitive situations.
- Low-interest business loans: If your primary concern is affordability, you might want to look into other low-interest loan options. Interest rates on small business loans and lines of credit typically start as low as 3.00% with traditional lenders. However, the lowest rates are typically reserved for the most qualified borrowers, so you may need to spend some time working on your credit and cash flow before you apply.
- Bad credit business loans: Though lenders set their own credit score requirements for SBA loans, fair to good credit is often required. If your personal credit score is too low to qualify for government-backed financing, you may be happy to learn that some alternative lenders are willing to work with borrowers with scores as low as 500, though bad credit business loans come with less favorable rates and terms.
- Specialized forms of financing: If you’re looking for funds to use for a specific purpose, such as purchasing essential equipment, you might be better off looking for specialized financing options. Many lenders offer equipment financing, and because the equipment is used as collateral to secure the loan, these loans may have lower rates.
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