An SBA Express Loan is small business loan made by an SBA lender that has a maximum size of $350K and maximum interest rate of 4.5% – 6.5% above Prime. While there are very few restrictions on the use of funds, SBA Express Loans are typically used by small businesses for smaller, less complex deals.
Most people assume SBA Express loans are SBA loans that you can get quickly, but that’s not entirely true. While parts of the SBA approval process can be quicker, the vast majority of any SBA application and funding process is controlled by the lender. In most cases, the change in funding time is negligible. In this article, we’ll discuss SBA Express loans in detail and help you identify your best option for fast SBA funding.
If you’re looking for an SBA loan of up to $350K and need the funds quickly, we recommend SmartBiz. They can work with businesses that have been operating for 2+ years and have a credit score above 680. The entire application can be completed online. Getting prequalified takes just a few minutes and they reduce the typical SBA funding time from 2 – 3 months to as little as 3 weeks.
SBA Express Loans
While there are many different types of SBA loans, when most people think of SBA loans, they are thinking of the SBA 7a loans. SBA 7a loans are the most popular SBA loans (by far) and can be used for everything from working capital to buying commercial real estate.
While similar, SBA 7a Express Loans differ from traditional 7a loans in four important ways. SBA Express Loans have:
- Lower maximum loan amounts
- Higher maximum interest rates
- Lower SBA guarantees for the lender
- Greater lender authority
Below is a table summarizing the primary differences between SBA Express loans and SBA 7a loans, followed by a more in depth explanation:
SBA 7a Loans vs SBA Express Loans
|Traditional SBA 7a Loan||SBA Express Loan|
|Maximum Loan Amount||$5,000,000||$350,000|
|Maximum Interest Rates||Prime + 2.75||Prime + 4.5 - 6.5|
|Lender’s SBA Guarantee||75% - 90%||50%|
|SBA Review Time||2-3 Weeks for non-PLP lenders|
Not required prior to closing for PLP lenders
|Applications reviewed within 36 hours|
|Funding Time||45 - 90 days with most lenders|
Less than 30 days with SmartBiz
|45 - 90 days with most lenders|
|Lenders||Visit SmartBiz||Visit Your Local SBA Lender|
SBA Express Loans vs SBA 7a Loans In Detail
Small business owners will notice two very important differences between and SBA express loan and an SBA 7a loan:
- Lower maximum loan amount ($350K)
- Higher maximum interest rate (Prime + 4.5 – 6.5)
An SBA 7a loan has a maximum loan size of $5MM and a maximum interest rate of Prime + 2.75. On the other hand, an SBA Express loan has a maximum size of $350K and a maximum interest rate of Prime + 4.5 – 6.5.
The reason there are still customers for these loans, despite the disadvantages, is because lenders promise quicker funding times. And there is little doubt that business owners will pay a premium for speed.
SBA Express loans can have quicker funding times in certain situations because the SBA gives more independence to the lender when it comes to the loan approval process. Essentially, the SBA is agreeing to trust the lender’s underwriting and just do a high-level review of the loan before approving it, rather than an in-depth review.
The reduced review process increases the risk for the SBA. To help ensure they’re not exposing themselves (and US taxpayers) to too much additional risk, the SBA reduces their exposure in two ways:
- Lowers their exposure (maximum loan size $350k)
- Lower guarantee (50% guarantee of loan)
Those limitations make the loans less profitable for the lender. And, because the SBA still wants to encourage lenders to make loans to small businesses, they allow the lenders to charge a higher interest rate.
Are SBA Express Loans Fastest? Preferred Lender Program vs SBAExpress Program
The time it takes to get SBA funding is primarily dependant on three things:
- Lender underwriting efficiency
- Borrower preparedness
- SBA approval
Small businesses looking for fast SBA loans should keep in mind that the most important thing impacting the speed of funding will be the lender’s efficiency. Working with an experienced, efficient SBA loan provider like SmartBiz will do more to reduce your funding time than any SBA program.
Slow SBA funding times have been a common complaint since the loan guarantee program began. The SBA developed two programs to help limit funding delays by reducing the burden they place on lenders:
- Preferred Lender Program (PLP)
- SBAExpress Program
PLP lenders have lots of SBA lending experience and have a history of making good loans. That track record enables the SBA to trust the lender to make SBA loans with lessened oversight on all SBA 7a loans, regardless of size or term.
The SBAExpress Program, on the other hand, increases the the independence of the lender by reducing their exposure to the loans made under the program. SBA Express Loans are smaller (capped at $350K) and the SBA guarantees a smaller percentage of the loan (50% instead of up to 90%).
But neither the PLP or SBAExpress Programs helps speed up the lender’s internal processes. If your lender has inexperienced loan officers, antiquated technology, or redundant layers of management, the loan will take forever regardless of the SBA. Those are the reasons why traditional lenders take 3 months to get SBA loans completed.
That’s what make SmartBiz’s SBA 7a loan program so impressive. They can typically get SBA 7a loans funded in under 30 days. If you’ve been in business 2+ years and need up to $350k in funding, we recommend working with SmartBiz. You can apply online and get approved in minutes.
Who an SBA Express Loan Is Right For
An SBA Express Loan can be a good fit for strong borrowers seeking up to $350K who aren’t able to qualify for traditional 7a loans. In general, you’ll need:
- Credit score above 680 (check your credit score here for free)
- Debt-service-coverage-ratio (DSCR) of 1.1 or higher
- Positive revenue trends
- Profitable business
Proceeds from the loans can be used for working capital, to refinance business debt, to purchase equipment or commercial real estate, to fund a business acquisition, and more. While the use of proceeds are flexible, there are strict limits on the borrowing amount ($350K in most cases) and the loans come with higher allowable interest rates.
Most small businesses starting their hunt for an SBA Express loan are probably looking an SBA loan that they can get quickly. And with a name like “SBA Express,” it certainly sounds like it would be a way to get a quick SBA loan, but it isn’t. The “express” refers to the lender’s interaction with the Small Business Administration, not the borrower’s interaction with the lender.
In fact, how quickly you’re able to obtain funding will depend much more on how experienced your lender is with the SBA process, whether they’re a PLP lender, and whether you’ve presented the lender with a complete loan package. For this reason, many SBA Express loans can take 2-3 months to obtain.
For those small businesses looking to borrower up to $350K quickly, we recommend working with SmartBiz on a traditional SBA 7a loan. SmartBiz’s online application process can prequalify you in just a few minutes. You can complete the application entirely online and SmartBiz reliably gets businesses the SBA funding they need in under 30 days.
Even SBA Express Loans Can Be Slow
SBA loans often take a minimum of 2-3 months to obtain. It might be surprising to learn that the SBA Express program doesn’t actually address the primary causes of such slow turnaround times. Slow SBA funding times are the result of four primary issues:
- SBA Loan Guarantee Programs vs Actual Loans
- Inefficient Lenders Lead to Slow Lending Decisions
- Lender Appetite for Specific Loans
- Unprepared Borrower with Incomplete Paperwork
Let’s take a closer look at each of these issues below.
#1: SBA Loan Guarantee Programs vs Actual Loans
In most cases, the SBA doesn’t actually lend money to small businesses. Rather, the SBA makes it less risky for banks and other lenders to make small business loans by guaranteeing a certain percentage of a loan as long as those loans conform to strict SBA standards. So the “SBA approval” is something your lender is seeking for their loan after they’ve made the initial decision to lend your small business money. The SBAExpress program is one of the SBA’s loan guarantee programs.
These guarantees reduce the risk a lender takes when the make a loan because they know the SBA will cover a certain portion. In this way, the SBA’s loan guarantee programs are meant to encourage banks and other lenders to make more loans, more often.
The percentage of the loan that the SBA will guarantee ranges from 50% – 90%, depending on the program and the size of the loan. Loans made under the SBA 7a program get a guarantee of 75% – 85%, while loans made under the SBA Express program only receive a 50% guarantee.
The SBA Express program is simply offering lenders slightly different incentives. When a lender makes an SBA Express loan, they are making smaller loans, accepting a lower guarantee from the SBA, and allowed to charge a higher maximum interest rate. In exchange, the lender gets to use their own loan analyses, procedures, and documentation for credit and eligibility decisions (that’s the “express” part).
However, most SBA loan programs already have a way for lenders to make loans more quickly. The Preferred Lenders Program (PLP) is available to experienced lenders to help them speed up the SBA loan process. Many lenders (most regional or national lenders included) are PLP lenders.
The SBA gives a turnaround time for their review of around 24 hours to PLP approved lenders looking to give traditional SBA loans of up to $350,000. They give these loans with lower interest rates and longer repayment terms than SBA Express loans.
PLP lenders are still not any more likely to fund a loan quicker than the typical 45 – 90 days that most SBA loans take. That’s why a company like SmartBiz is so impressive. For those businesses that have been operating for 2+ years, who have credit scores above 680, and who are profitable, you can often get funded in under 30 days for loans up to $350K.
#2: Inefficient Lenders Lead to Slow Lending Decisions
As we’ve discussed, when you apply for the vast majority of SBA loans, you’re applying with for the loan with a lender, not the SBA. The lender, not the SBA, controls the vast majority of the application and underwriting processes, and ultimately decides when to move forward with a loan approval. This means that many of the issues around funding time on SBA loans are the result of inefficient lending partners.
Many lenders have antiquated, inefficient SBA application processes. Many still require you to go into an office, talk with a number of bank employees, and hope that you finally get passed to a loan officer that’s familiar with SBA loans. After all of that, the loan officer will probably just hand you some application paperwork. Keep in mind, you probably have to do all this on your lender’s 9-5, weekdays only schedule.
After the application, if the lender thinks you’ll be a good fit, then they’ll request a huge amount of information from you which you’ll have to bring into them to review. And typically they’ll only review things once everything on their list is in. This is a highly inefficient process that slows down all SBA loan applications, regardless of whether they’re SBA Express loans or SBA 7a loans.
Only after the lender has a complete loan package from you and has approved your loan internally will they seek SBA approval. PLP lenders get that approval within 24 hours. Express loans get approval notice in 36 hours. When it comes down to it, the antiquated application process at traditional lenders is what slows down SBA funding times, not the SBA’s approval time.
That’s why a partner like SmartBiz can be so important to make sure you’re getting your SBA funding quickly. Their 5 minute online pre-qualification lets you know whether you’re a good fit. You can then complete the application online, 24/7. They’ll only request the documents they need to complete your underwriting which means no chasing down hard-to-find documents a bank “might need.”
#3: Lender Appetite for Specific Loans
Inefficiency isn’t the only thing that can slow down the lending process with SBA Express loans. Sometimes a lender just doesn’t have the appetite to do your specific deal. There can be a couple reasons for this:
- Too much exposure to similar deals: The lender has many outstanding loans like this already and management has decided they need to get a better mix of loans to reduce their exposure to any one industry, any one type of borrower, any one size of loan, etc.
- Bad experience with similar deals: The lender has done a number of loan like yours in the past and they have has a higher than normal rate of default. The lender then avoids the deals altogether or significantly increases the requirements to borrow.
- Inexperience with this type of deal: The lender isn’t very familiar with your business model or isn’t familiar with what will go into underwriting your loan. Rather risk putting in time on a loan that might not get approved, they will choose to avoid deals they are unfamiliar with.
The problem is, most lenders won’t come out and tell you they don’t have an appetite for your loan. If you submit an application, they’ll go through the motions because they have to, even though they know that they are unlikely to approve the loan. This can be a huge waste of time and energy for a small business owner. So what do you do?
One thing you can do is put in applications with several lenders, but that comes with it’s own risks. Namely, you may get hit with multiple credit inquiries. Also, if you thought working with one inefficient lender would hard, try working with multiple inefficient lenders at the same time. What you really want is to have someone who knows which lenders are most likely to do your specific loan guide you to that lender.
That’s another reason we recommend for businesses who are looking for under $350K in SBA funding to work with SmartBiz. “SmartBiz’s technology has created an ecosystem for borrowers and lenders” said Evan Singer, CEO of SmartBiz. “The platform allows us to match the right borrower with the right bank. Different banks will say yes or no to different loans. We added more lenders to our marketplace this year so we can say yes to small businesses more often. Our software can help pair borrowers with the right lender the first time. That means more borrowers getting approved for the amounts they request, with payments they can afford.”
If you’ve been in business for 2+ years, have a credit score of at least 680, are profitable, and looking to borrow up to $350K, we recommend apply with SmartBiz. You can get pre-qualified in under 5 minutes and complete an application online, 24/7.
#4: Unprepared Borrowers with Incomplete Paperwork
While there is a lot a lender can do to speed up the SBA funding process, there are limits to what they can do. In the end, even the most efficient SBA lenders can only work as fast as their borrowers allow them to. Understanding what documentation will be needed by your SBA lender and preparing it ahead of time, will not only increase the speed of funding but can also increase your chances for approval.
Here is a list of documentation you can expect to need during the SBA Express loan process:
- SBA Loan Application
- Plans for Loan Proceeds
- Personal Financial Statement
- Statement of Personal History
- P&L Statement
- Financial Projections
- List of Ownership and Affiliations
- All Business Licenses or Certificates
- Loan Application History
- Last 3 Years of Signed Personal and Business Tax Returns
- Personal Resumes (owners with 20%+ stake in the company)
- History and Overview of the Business
- All Business Leases
You can plan on filling out specific SBA forms in addition to all the above documentation. We have put together guides on each form to help you in your application process.
- SBA Form 413 (Used to evaluate the financial ability of you, your spouse, and other owners of the business.)
- SBA Form 1919 (This form is where all basic borrower information is provided.)
- SBA Form 912 (A statement of personal history used to assess your character.)
- SBA Form 159 (This is a disclosure statement used if you hired someone to help you fill out your SBA loan application.)
In addition, if you plan on using the SBA funds to purchase an existing business then you need to prepare to provide the following documents for the business you want to acquire:
- Current balance sheet and P&L statement of business being purchased
- The last 2 years of the business’s income tax returns
- A Bill of Sale, or the proposed terms of sale
- List of the total asking price that includes:
- Schedule of inventory
- Machinery and equipment
- Furniture and fixtures
Additional documentation may be required when buying or renovating commercial property.
If this seems like a lot of information, don’t worry. You can follow our step by step guide on how to apply for an SBA loan.
After seeing how much will actually go into completing an SBA application, it becomes clear why quick and easy pre-qualifications can be so helpful. You only want to put in all this work if you’re likely to get approved for the loan. That’s why we recommend that if you’ve been in business for 2+ years, have a credit score above 680, are profitable, and are looking to borrow up to $350k, that you apply with SmartBiz. They can pre-qualify you in minutes and have you funded in as few as 10 business days.
SBA Express Loan Programs in Detail
The SBAExpress program is built on the framework of the SBA 7(a) loan program. 7(a) loans are the most common type of SBA loan and are what most people think of when they think of SBA funding. You can use the proceeds of the loan for everything from inventory to equipment to commercial real estate. Express loans just have a smaller limit and a higher maximum interest rate. And there are actually two SBA Express loan programs. We’ll take a closer look at each option below:
1. SBA Express Loans
Overview: The SBA Express features an accelerated turnaround time for SBA review, but with a smaller maximum loan amount. The SBA will respond to your application within 36 hours, but the maximum you can only borrow is $350,000, rather than the $5 million allowed under the standard 7a.
Maximum Loan Amount: $350,000
Maturity: 7 Years for line of credit, 25 years for real estate, 5 – 10 years otherwise
Interest Rates: Lenders and borrowers can negotiate the interest rate. Rates can be fixed or variable and are tied to the prime rate (as published in The Wall Street Journal), LIBOR, or the optional peg rate (published quarterly in the Federal Register) and may be fixed or variable, but they may not exceed SBA maximums: lenders may charge up to 6.5 % over the base rate for loans of $50,000 or less, and up to 4.5 % over for loans over $50,000.
SBA Turnaround Time: 36 hours
Actual Funding Time: 45 – 90 days
Forms: Lender forms, and SBA form 1919.
Collateral: Lenders are not required to take collateral for loans up to $25,000; they may use their existing collateral policy for loans over $25,000 up to $350,000.
Who is it Right For: The SBA Express may be a good option for those looking for loan under $350,000. The simplified application process and quicker turnaround time make this an appealing alternative to the standard 7a.
If you’re looking for up to $350K in SBA funding, we recommend apply with SmartBiz. If you’ve been in business for 2+ years, have a credit score above 680, and are profitable, you may qualify. Get pre-qualified in under 5 minutes and funded in 30 day.
2. Export Express Loans
Overview: The SBA Export Express Program is a streamlined method to obtain SBA-backed financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation, and the SBA provides an expedited eligibility review and provides a response within 24 hours. The funds must be used to enhance the business’s ability to export goods and services.
Maximum Loan Amount: $500,000
Maturity: 7 Years for line of credit, 25 years for real estate, 5 – 10 years otherwise
Interest Rate: Lenders and borrowers can negotiate the interest rate. Rates can be fixed or variable and are tied to the prime rate (as published in The Wall Street Journal), LIBOR, or the optional peg rate (published quarterly in the Federal Register) and may be fixed or variable, but they may not exceed SBA maximums: lenders may charge up to 6.5 % over the base rate for loans of $50,000 or less, and up to 4.5 % over for loans over $50,000.
SBA Turnaround Time: 24 hours
Actual Funding Time: 45-90 days
Forms: Lender forms, and SBA form 1919.
Collateral: Collateral is based on the policies and procedures established by the lender for its non-SBA-guaranteed loans.
Who is it Right For: The Export Express is a good option for businesses that need $500,000 or less in loans to begin or expand their export business. The simplified application process and the quicker approval turnaround make this loan similar to the SBA Express. For more information, click here.
If you’re looking for up to $350K in SBA funding, we recommend applying with SmartBiz. If you’ve been in business for 2+ years, have a credit score above 680, and are profitable, you may qualify. Get pre-qualified in under 5 minutes and funded in 30 day.
SBA Express loans are just one of several SBA loan programs. A lot of these programs are made for specific business situations or borrowers. Regardless of the type of loan program, they can all be time consuming to get funded. Some have options similar to an SBA Express loan while others do not. You can find more information about each type of SBA loan in the table below.
SBA Loan Programs Overview
|Type||What is it?||Who is it for?|
|Overview: 7a Loan terms with a lower cap and faster turnaround time. |
Loan Amounts: Up to $350,000
Maturity: 7 Years for line of credit, 25 years for real estate, 5-10 years otherwise
|SBA Express may be right for you if you need funds faster than you would receive them under a traditional 7a loan, and you only need to borrow up to $350,000.|
|Overview: Similar to the SBA Express, but funds must be used to enter a new or expand a current export market.|
Loan Amounts: Up to $500,000
Maturity: 7 Years for line of credit, 25 years for real estate, 5 - 10 years otherwise
|If you are looking to expand your goods or services export business and need less than $500,000 then the export express option provides a quick process for you.|
|Overview: Loan with 7a terms to meet small business working capital needs through 5 lines of credit. |
Loan Amounts: Up to $5,000,000
Maturity: 5 Years for Builders line, 10 years for all others.
|CAPLines might be a good option for you if you have very seasonal business patterns and are looking for a working capital line of credit.|
|Export Working Capital|
|Overview: 7a term loan for working capital to increase potential export sales. |
Loan Amounts: Up to $5,000,000
Maturity: May go up to 3 years, but generally 1 year or less.
|If you need short term capital and run an export heavy business then this might be the right option for you.|
|Overview: 7a term loan providing working capital to help small businesses compete better internationally.|
Loan Amounts: Up to $5,000,000
Maturity: Up to 25 years
|If you need working capital because you have been negatively impacted by imports, or if you need the funds to expand your international trade business then this might be your best option.|
|7(a) Small Loans|
|Overview: Used to make smaller loans to benefit local economic growth and job creation.|
Loan Amounts: Up to $350,000
Maturity: Generally real estate is 25 years, other uses are 5-10 years. Depends on ability to repay.
|If you need a nearly instant approval, but only a small working capital loan, then the 7(a) small loan program is a great option.|
|Overview: Allows mission-driven organizations to make SBA loans in underserved communities. |
Loan Amounts: Up to $250,000
Maturity: Generally real estate is 25 years, other uses are 5-10 years
|The community advantage is attractive to businesses in underserved communities looking for small working capital loans to grow their businesses.|
Useful Definitions for SBA Loans
When applying for SBA express loans, you may run into some terminology that is new to you. The table below has some terms and definitions you may find useful helpful as you pursue SBA funding.
SBA Express Loan Terms and Definitions
|Small Business (Under the SBA)||The SBA defines what a small business is through their size standards. These are based on either employee count or revenue size. A table of the standards by industry can be found here.
The general definition of a small business for manufacturing businesses is less than 500 employees. For non-manufacturing businesses it is less than $7.5 million in annual revenue.
|Debt to Income Ratio (DTI)||DTI is used to determine a business’s ability manage monthly debt payments. It is calculated by dividing total monthly debt by gross monthly income, and expressed as a percentage.|
|Debt Service Coverage Ratio (DSCR)||The ratio of available cash to service debt through interest, principal, and lease payments.|
|SBA Guarantee Percentage||The percentage of the loan balance the SBA is willing to guarantee, or to honor, in the event of a default. If the SBA guaranty percentage is 50%, then upon default the SBA will repay the lender up to 50% of the loan principal.|
|Lease Subordination||A lease subordination guarantees that the SBA lender is positioned ahead of any potential landlord disputes in the event of a default. A lease subordination is required to be signed by the landlord of any leases the business has.|
Through SBA Express loans lenders give you money at the same speed as a traditional 7a loan, but with higher interest rates and shorter repayment terms. The SBA Express loan program speeds up the SBA review process for lenders, but does not typically get you funded any quicker than a traditional SBA program.
If you need funds quicker than the typical 45 – 90 days that SBA loans take, and you only need to borrow up to $350,000, then you should consider working with SmartBiz. SmartBiz can match you with the right lender and help you get funded in less than 30 days with cheaper interest rates and longer repayment terms than an SBA Express loan.