Applying for a loan is a big deal for most business owners. Complicating matters is the timeline to secure the loan, ranging from same-day business loans to loan processes that take months.
The following is a rundown of the loan process and how long it might take to secure the money should you opt to take out a business loan.
The timeline depends on the type of loan
Same-day business loans take anywhere from 24 to 48 hours on average, from the point you submit a completed application to the point the money lands in your bank. Loans that you go through a traditional bank to secure can take weeks and require a lot more information from you about your business and its performance.
Unfortunately, the time frame depends on the type of loan you go after. The process is still the same for either type of loan, but the amount of information required and the speed at which it gets reviewed varies significantly.
The type of financing impacts the timeline
Additionally, the type of financing you want can affect the timeline. In most cases, a standard loan will take more time than applying for and establishing a line of credit. A bridge loan generally has a faster process than a capital improvement loan. Same-day loans often function like a bridge loan, but the approval process is even quicker.
The standard loan process
A typical financing process has three parts:
- Applying for the loan
- The lender determines you are creditworthy
- The lender lending you the money
The part that takes the longest is usually the lender determining you deserve a loan. You will have to supply them with financial and sales records, and sometimes they want to see any growth plans you have implemented. The financial data they will want to see is your revenue, outstanding debt, and usually, your vendor records to verify you do pay your debts on time.
Getting the money is usually the quickest part of the loan process. That can take as little as a few hours from approval to depositing the funds in your bank account. Depending on the type of deposit they make and your bank’s policies on processing funds, you can have access anywhere from within hours to a couple of business days.
How long it takes to apply for the loan is up to you. Included in that process are meetings internally with your managers, meeting with the bank in some cases, filling out the paperwork, and collecting the records the bank needs to make a decision. If you make it a priority, you can probably be one in a few days, but this part of the process depends on your priorities.
The standard approval process
A typical loan approval process also depends on the loan you are trying to secure. Here are some general frameworks for standard-type loans.
The approval process follows the same trajectory regardless of the loan you apply to receive. The bank or lender reviews your financial history, discusses any issues with you, including possibly asking you for more information, and then the lender decides if it will lend to you and the interest rate it will charge you.
Quick funding type loans can take as little as 24 hours, particularly if you have the paperwork ready to go when you apply. A traditional business loan will usually take several weeks as your finances get reviewed, and an underwriter is secured.
The key to a speedy approval is showing the lender that you can repay the loan in the time allotted by the loan and that you have both the volume of business to afford the loan and a history of paying off debtors. The more information you can give them proving those three points, the easier it is to get the lending approved.
SBA loans often can take 45 days or longer. The SBA loan program is very popular, and the process is well defined because it is a government program. Once you have done your part in the application process, you can expect a minimum of a month and a half to receive your approval.
Affecting the timeline is the type of loan you are applying to receive. Each type of loan has different qualifying criteria, which must be verified and take quite a while. The SBA website asserts that the typical timeline can take up to three months to approve a loan.
A business loan can help a company grow, get through a rough patch, or make an improvement to its facilities or operations. The time it takes depends on what type of financing you want, how much the loan is, and the applicant’s financial history. If an applicant has all their paperwork in order, funding can range from a few hours to a few months