SBA Express Loans: What You Should Know

SBA Express Loans: What You Should Know

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As part of an effort to get small business owners funds more quickly, the Small Business Administration (SBA) launched an express version of their popular 7(a) loan program. This program promises a credit decision from the SBA within 36 hours in exchange for lower loan amounts and slightly higher interest rates.

What is an SBA Express Loan?

Because the funding process for a standard SBA 7(a) loan can take several months, the administration launched the Express Loan program to help get money to small businesses more quickly. The Express Loan program has a streamlined application process with the SBA promising a credit decision within 36 hours after the application is submitted. However, this has nothing to do with how quickly your lender approves your application or funds your loan.

While the application process is speedier, you cannot borrow as much as with a standard 7(a) loan and you’ll be subjected to higher interest rates. However, these rates are generally lower than what you would find with online business loans, which also offer quick processing times.

The SBA will also not guarantee as much on an Express loan as with a normal 7(a) loan, which accounts, in part, for the higher interest rates. This also means that lenders have greater leeway with their eligibility criteria and how they approve applicants. In fact, your lender will decide which specific application forms and processes you need to complete (with the exception of one SBA form).

Like standard SBA loans, Express loans can be used for the following purposes:

  • Working capital.
  • Furniture and fixture purchases.
  • Machinery and equipment purchases.
  • Real estate, including purchasing land or buildings, construction, and renovations.
  • Business acquisition.
  • Refinancing of existing debt.

Express loans can also be issued as a term loan (like standard SBA loans) or as a revolving line of credit. Repayment terms and rates will vary based on what type of loan you choose, what you plan to use the funds for, and how much you borrow.

SBA Express Loan Rates and Terms

The SBA sets maximum loan amounts, repayment terms and interest rates for the Express Loan program. The maximum interest rate is based on the Prime Rate plus a margin of 4.5% or 6.5%. Your actual rates and terms will be set by your lender, and they may be lower than the maximums listed below. It’s up to you to negotiate with your lender to get your best terms possible.

Maximum Loan Amount$350,000
Maximum Repayment Term
  • 7 years for a line of credit
  • 10 years for inventory or working capital
  • 10 years or useful life for equipment and machinery
  • 25 years for real estate
Maximum Interest Rates
  • 11% for loans of $50,000 or less (Prime Rate + 6.5%)
  • 9% for loans over $50,000 (Prime Rate + 4.5%)
FeesVary by lender, but may include:
  • Application fees
  • Packaging and servicing fees
  • Non-sufficient funds/late payment fees
CollateralGenerally required for loans over $25,000
Personal GuaranteeYes
Prepayment PenaltyFor loans with maturities of 15 or more years, but only if the loan is prepaid in the first three years

Guarantee Fees

Like standard SBA loans, the SBA will guarantee a percentage of each Express loan. In this case, the maximum the SBA will guarantee is 50% of the loan. The SBA will assess a guarantee fee on the guaranteed portion of the loan. The fee is based on the loan amount and repayment term, and your lender has the option of passing this fee onto you (which most lenders do).

Loan AmountRepayment Term of 1 Year or LessRepayment Term of More Than 1 Year
$150,000 or less0.00%0.00%
$150,001 - $350,0000.25%3.00%

Eligibility Criteria

The SBA requires businesses to meet the minimum eligibility criteria listed below. One exception to the criteria below is that certain types of for-profit businesses, such as financial institutions or casinos, are not eligible for Express or standard 7(a) loans. You can see a full list here.

  • Be for-profit business operating in the United States.
  • Meet SBA small business size requirements.
  • Have invested equity in the business.
  • Use other funding sources, including personal sources, before seeking financial assistance.
  • Use of funds for approved purposes.
  • Demonstrate that reasonable credit is not available elsewhere.
  • Not be delinquent on any government debt.
  • Demonstrate ability to repay loan.
  • Good character of owners.
  • Good personal and/or business credit.
  • Relevant management expertise of owners.
  • Feasible business plan.

Your lender may have criteria above and beyond what the SBA requires. Generally speaking, lenders look for borrowers and businesses that meet the “five Cs of Credit”: character (which is credit history), capacity (which is your current personal and business financial situation), capital (which is your down payment), collateral (which is what assets you put up to secure the loan), and conditions (which is how you plan to use the loan).

Application Process

The application process for an Express loan will vary by lender (you can find SBA Express lenders in your area by using a tool on the SBA website). The SBA requires borrowers to fill out Form 1919, but the rest of the forms and procedures needed are at your lender’s discretion. Form 1919 requires borrowers to provide the following information:

  • Ownership and affiliate information.
  • Loan application history with the SBA.
  • Planned use of loan proceeds.
  • Employee headcount and job creation information.

Your lender may want to see current and projected financial statements, business tax returns and a business plan. They will also check your personal and if applicable, business credit reports. You may also need to submit a resume and personal tax returns to your lender.

Once your lender submits your application the SBA, you can expect to hear a decision from the administration within 36 hours. How long it takes for your lender to review your application and fund your loan is a different story altogether as the SBA doesn’t enforce strict guidelines on when a lender needs to return a decision on an Express loan application. However, in our review of lenders that offer Express loans, most seem to have online applications and to disburse funds within a few of days of SBA approval.

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Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.