SBA Express Loans

Get to know SBA Express Loans

Gerri Detweiler • February 24, 2021

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What is a SBA Express Loan?

The SBA Express loan is a streamlined SBA loan program designed to reduce paperwork and make funding approval faster. The maximum loan amount for an SBA Express loan has been $350,000; however, due to the coronavirus economic crisis that limit has been raised to $1 million until October 1, 2021 when it changes to $500,000 permanently. The difference between the 7(a) Small Loan and the Express Loan is that with the latter, the lender can get a decision from the SBA within 36 hours. Loan proceeds may be used for the same purposes as other SBA loans; including working capital, real estate and even refinancing debt. 

Here are the main features of the SBA Express Loan program:

• Up to $1 million through September 30, 2021; then $500,000;
• Interest rates and repayment terms are attractive;
• Decision from the SBA within 36 hours from receipt of completed loan application;
• May not require collateral for loans up to $25,000.

What are the SBA Express Repayment Terms?

The length of the loan depends on the type of loan and/or how funding will be used. SBA guidelines require that “the loan term must be the shortest appropriate term based on the use of proceeds and the borrower’s ability to repay.” Here are some additional requirements to be aware of:

Revolving loans/ lines of credit:

SBA Express lines of credit may not exceed 10 years inclusive of a term-out period. (A term-out period here refers to the period where you repay the loan but cannot take money out, while the draw period refers to the time period when you can take money from the available credit.) 

SBA Express Revolving loans can be structured with a renewable 12 month period (with no term out.) But revolving loans of more than 12 months must be structured with a term-out period that is not less than the draw period, with no draws permitted during the term-out period. Advances after the initial 60 month period are not allowed in any case. 

For example, the loan can have an 8 year maturity with a 2 year draw period and a term-out period of 6 years. However, a loan with an 8 year maturity cannot have a draw period of 6 years and term-out period of 2 years because the draw period would be longer than the term out period, and would be more than 60 months.

Term Loans:

A term loan generally refers to a loan where you get a specific amount of funding that you repay over a specific period of time. The term for the SBA  will depend on the use of funds, going up to:

• 10 years for working capital or inventory loans and the financing of intangible assets (including goodwill). 

• 10 years generally for equipment, fixtures, or furniture loans. However, that may be extended to up to 15 years if the IRS asset class useful life supports the term. 

• 25 years for real estate loans (including acquisition, rehabilitation, renovation, or construction) unless a portion of the loan is used for construction or renovation of the real estate. In the case of construction or renovation, that period may be added to the 25 year term. 

• 10 years for leasehold improvements may not exceed, plus an additional period reasonably necessary to complete the leasehold improvements (for up to an additional 12 months).

Blended maturities may apply to mixed purpose loans (including change of ownership) where loan funds are used for multiple purposes or, if 51% or more of the use of proceeds are for real estate, the maximum maturity may be up to 25 years.

Is SBA Express a 7(a) Loan?

Yes, an SBA Express loan is a loan program in the SBA 7(a) program. Because it is, many of the same requirements that apply to 7(a) loans apply to these loans and funds may generally be used for similar purposes, such as working capital, inventory, real estate etc.

What are the SBA Express Loan Interest Rates and Fees?

Rates are negotiated between the lender and the borrower but can’t exceed the maximum rate allowed by the SBA.

SBA Express loans may have a fixed or variable interest rate. It is even possible for a loan to carry a fixed rate on either the guaranteed or unguaranteed portion and a variable rate on the other portion of the loan, as long as neither exceeds maximum allowable rates set by the SBA. (These are published periodically in The Federal Register.) You can learn more about SBA loan rates here.

SBA Express Maximum Interest Rates Allowed

Product SBA Express Loans	Interest Rate The published maximum allowable fixed rate or if variable:
$50,000 or less (All maturities)	Cannot exceed Prime + 6.5%
More than $50,000 (All maturities)	Cannot exceed Prime + 4.5%

 At the current prime rate of 3.25% this means rates can’t exceed 7.75% for larger loans and 9.75% for smaller ones.

Fees for Express Loans

The SBA has provided some fee relief for all 7(a) loans approved October 1, 2020 through September 30, 2021:

Annual Service Fee: The annual service fee will be 0.55% (55 basis points) of the guaranteed portion of the outstanding balance of the loan.

For loans with a maturity that exceeds 12 months, the fees are: 

• For loans of $150,000 or less: 2% of the guaranteed portion. The Lender may retain no more than 25% of the fee (i.e., at least 1.5% must be remitted to SBA).
• For loans of $150,001 to $700,000: 3% of the guaranteed portion. 
• For loans of $700,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.

Good news if you are a veteran-owned business! For all SBA Express loans made to veteran-owned small businesses, the upfront guaranty fee will be zero.

How Do I Qualify for a SBA Express Loan?

Borrowers generally have to meet the same qualification requirements as other SBA 7(a) loans. That means, among other requirements, they must:

• Be a for-profit small business (based on SBA size standards) in the U.S.;
• Not operate in an ineligible industry, including certain passive businesses;
• Not have caused a prior loss to the government on a federal debt (i.e. defaulted student loans or tax debt) that hasn’t been satisfactorily resolved;
• Meet the character requirements for all owners with 20% or greater ownership; business owners with certain criminal histories may not be eligible;
• Have acceptable credit;
• Be at least 51% owned by a US citizen or lawful permanent resident.

The SBA generally requires all owners with 20% or greater ownership to sign the SBA Form 1919, the “Borrower Information Form.  Don’t get too worried about filling out the SBA loan application; your SBA lender will guide you.

An SBA Express Loan application can’t be denied solely based on lack of collateral. For loans of $25,000 or less, lenders are not required to take collateral. For loans over $25,000, the lender may require collateral.

What Is the Application Process for a SBA Express Loan?

You must apply for one of these loans through an SBA Express Lender who has been  approved by the SBA to make these loans. Because this is a government program there will be many specific requirements you’ll need to meet but don’t worry about that too much; again,  the lender will help you navigate the requirements. (You should, though, respond to any requests from your lender quickly to help ensure your application continues to move forward.)

Once your lender has packaged your application it will be submitted to the SBA which then will respond within 36 hours with an approval or decline. That doesn’t mean you can fund that quickly but it does help speed up the application process.

Lenders must make “prudent” lending decisions, and the cash flow of the applicant is the primary source of repayment, not any expected recovery from the liquidation of collateral. In other words, they can’t overlook credit or cash flow problems just because the borrower has pledged collateral. The SBA has authorized SBA Express Lenders to make the credit decision without prior SBA review.

What Credit Score Is Required for an SBA Express Loan?

There is no minimum credit score required by the SBA for an SBA Express loan, but individual lenders may require a minimum personal credit score: 680 or above is common. SBA loans typically involve a personal credit check for all owners with 20% or greater ownership, and may involve a business credit check as well.

SBA Express lenders have the option of using a business credit scoring model if they do that for other similarly-sized, non-SBA guaranteed loans. The guidelines state: “The credit decision on SBA Express loans, including how much to factor in a past bankruptcy or whether to require an equity injection, is left to the business judgment of the lender.”

How Long Does It Take to Get an SBA Express Loan?

Although this loan is designed to be faster and more streamlined than other SBA loans, don’t expect to get funds in a few days. Once the loan has been submitted to the SBA, the SBA lender can get a decision in 36 hours. But that does not include all the time needed to complete the loan application process. Expect up to two months, though some lenders are able to get most completed in 30 days or so.

How Can I Use Funds from an SBA Express Loan?

Borrowers may use an SBA Express loan for working capital, certain types of real estate financing, inventory etc. You may also use one of these loans to help finance a change in ownership for an existing business. 

You may even use funding from one of these loans to refinance debt, except when it would shift the cost of a loss from a lender to the SBA. Examples of acceptable refinancing uses include:

• The borrower wants to refinance debt that no longer meets their needs (for example, they have a term loan but they need a revolving loan instead); and
• The new loan improves debt service coverage by at 10% or more (not required if the refinanced is a revolving line of credit.)

There are some other specific requirements here. Again, your lender can guide you through the SBA loan application process and help you determine if it’s a fit.

What is the SBA Express Bridge Loan?

The Express Bridge Loan Pilot Program was created during the coronavirus crisis and it allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can be a term loan or used to bridge the gap while applying for a SBA Economic Injury Disaster loan (EIDL). If your business is waiting to get approved for an EIDL but needs cash quickly, you may want to reach out to your SBA Express Lender to ask about one of these loans. 

When to Use SBA Express Loans, and When Not to Use Them

SBA Express loans can be a much faster path to low-rate financing, especially if you can’t qualify for conventional loans. But they aren’t right for every situation. You won’t want to go this route if you need massive amounts of capital, in excess of millions of dollars, or for a property that isn’t owner-occupied real estate. If you need financing very quickly, you’re usually best off looking at other loan options rather than SBA lending.There are other SBA financing programs that may be a better fit. If you are a startup business without much of a track record, or you need a smaller loan amount ($50,000 or less), a SBA Microloan could be a better option. For businesses involved in exporting, a SBA Export Express Loan may be a better fit. Businesses impacted by a disaster may want to consider a SBA Disaster Loan. If you have bad credit or no credit, a SBA loan may not be a good fit for you, at all.

SBA Express Loan Companies

There are many lenders on the market that partner with the SBA to give businesses a variety of both short-term loans and long-term financing. These three are ready to help you take your SBA Express loan inquiry to the next step.

SmartBiz

While SmartBiz is a marketplace and not a lending institution, it’s an easy way to find the perfect SBA preferred lender that will meet your cash flow needs. They can get you funding in as little as 7 days from the time you start your application and are ready to match you to a variety of rates, from 6.25% – 8.50% variable (or prime rates plus 1.50% to 3.75%) in many different SBA loan programs.

Celtic Bank

Celtic Bank is a choice pick for those who want low-interest rates and a long loan repayment period. Go into this application with your best documentation of your time in business and a minimum of a 165 business credit score (separate from your personal credit score). You may be asked for collateral, but it’s the best way to get those cheaper rates you’re looking for.

Wells Fargo

This bank has been providing loan proceeds through the SBA program for a long time, but they also have their own express funding options. If you don’t find that you can meet the requirements of the SBA, consider their unsecured and Equipment Express® Loan, which gives you fast, flexible funding for business expansion and machinery needs. 

SBA Express loans are becoming increasingly in-demand, as small business owners become busier and with less patience for a long, drawn-out loan process. Remember, the timeline for processing an application is usually much shorter than the total time from the day you meet with the banker until you get your cash. Expect some back-and-forth with your lender to make sure you have everything perfect before you submit your application.