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 fast 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 ($1 million ) than the standard 7(a) loan ($5 million). However, the turnaround with an Express Loan can be within 36 hours, rather than five to 10 business days with an SBA 7(a) loan. This makes an SBA Express loan a good option for small businesses that need fast funding.

Here are the basics you need to know about SBA Express loans:

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 up to 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. So banks or other financial institutions may be more willing to provide small business loans to borrowers who might not otherwise qualify.

SBA Express loan interest rate maximums

The SBA caps the interest rates that 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 target set by the Federal Reserve. As of November, 2024, the prime rate is 7.75%. The maximum interest rate on SBA Express loans of $50,000 or less is the prime rate plus 6.5%. On loans over $50,000, the maximum rate is the prime rate plus 4.5%.

Check out our SBA loan calculator if you want to know what your monthly payments would look like.

SBA Express loan fees

The SBA assesses 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, it typically passes 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
• $701,000 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.

Differences between SBA Express loans, standard SBA 7(a) loan

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.

Where can you get an SBA Express loan?

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.

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 $25,000. 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 and SBA Form 912
• 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
• Copies of any leases or terms of proposed leases

You may need to gather additional financial documents depending on the lender.

Once you choose 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. Once your loan application is complete, your lender will submit it to the SBA for approval.

Step 4: 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.

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 need to factor a longer waiting period into your timeline.

SBA Express loans: Pros and cons

There are pros and cons of SBA Express loans that you should consider when weighing your options. SBA loans are just one of the options that 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 traditional bank loan or a business line of credit.

Pros

• Quicker turnaround time than standard SBA 7(a) loans
• No collateral required if borrowing up to $25,000
• More flexibility and authority for lenders on loan approval
• Can negotiate interest rates, which are capped by SBA

Cons

• May have higher interest rates and loan fees than some other available loan options
• Not available to borrowers with poor or fair credit
• Usually requires personal guarantee from business owner
• Application requires extensive paperwork
• Wait time may be longer than other non-SBA lending options