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How Long Does Small-Business Funding Take & Is an SBA Loan an Option?

  • Financing|
Published: 09/26/2017

Most people looking to start and manage a small business run into the same problem: coming up with the necessary funding to get things going or sustain the business’s growth. From finding a workspace to expanding production and keeping up with demand, there are multiple points in your small business’s lifetime that might send you searching for finances.

Luckily, there are also several funding sources small-business owners can take advantage of. It’s important to remember, however, that time is money – and it can take a significant amount of time to get that money!

Establishing Business Credit

Regardless of which funding route you choose, getting your business credit in order is always a smart first move. Having strong business credit allows you to get more favorable payment terms with new vendors and suppliers, makes it easier for you to purchase products or services, and helps you get better interest rates and credit terms from lenders. You can also get a business credit card once you’ve established credit, which can be a good source of funding if money gets especially tight for a limited period.

To set up business credit, you’ll need to get a Federal Tax Identification Number (TIN), open a business bank account, get a business phone number, and open a business credit file with all three credit bureaus. After that, all you need to do is build up your credit and monitor it regularly. Twenty-five percent of small-business owners have reported significant errors on their credit reports, so you need to keep an eye on it to make sure you’re being represented accurately.

The amount of time it takes to build business credit varies according to the business – think about it like building up your personal credit. Since there isn’t an end goal to building credit, it’s always an ongoing process.

In general, however, small-business owners can get vendor credit and funds right away, which will allow you to build up business credit over time. You can also get store credit in about 60 to 90 days and cash credit in 4 to 6 months after registering your small business with the credit bureaus.

Getting a Small Business Administration (SBA) Loan

The Small Business Administration provides a guarantee for qualified business owners to improve the business owner’s chance of approval for a bank loan. There are three main loan options: the 7(a), Microloan, and CDC/504 loan programs. The average SBA 7(a) loan is $371,628, which is a pretty significant windfall for most small businesses.

Although you usually deal with a bank throughout the process, these loans are through the SBA–meaning that there often aren’t quite as many requirements to qualify for funding. For instance, if you’re starting a new small business, the SBA usually requires that the business owner supply one-third of the required capital and guarantee the rest of the amount with reasonable business or personal assets.

The exact time it takes to close an SBA loan varies, as the application process is fairly long – it involves filling out the application, creating a detailed business plan, getting a credit check, and gathering a lot of financial statements and paperwork to support your case. This can take several weeks, or even months. At that point, the amount of time it takes depends on the lender’s timeline; in general, however, it takes about 60 to 90 days.  Currency is one of the few non-bank lending institutions with a complete SBA program.

Finding a Commercial Lender

Finally, if there are still gaps in your financing needs – after all, 27% of businesses claim they weren’t able to receive the funding they need – small-business owners can also approach banks and other lending sources. Although most banks won’t lend to brand-new small businesses unless it’s through the SBA, more established small businesses find that bank loans are a great way to secure funding.

If your small business has been around for a few years, it often is stable enough and has enough assets to work as collateral for a business loan through the bank. You can use the company’s inventory or accounts receivable, or even the business owner’s personal collateral, like home equity. The most important part of this process is researching the best loan for your needs and payment capabilities. Tools like Currency’s Express Engine can help with this.

Most banks take 30 to 60 days to close a loan package, but sometimes it can take three or more months, depending on the application. Lending platforms like Currency, however, significantly expedite the process by assessing business data, browsing a vast network of qualified lenders to find the right fit, and facilitating wire funding within a few days’ time.

Although there isn’t one timeline that all small-business funding adheres to, exploring options that can expedite the process is always a positive step. Most small-business owners know that waiting to hear back from banks can take months, which is a time sacrifice that entrepreneurs can seldom afford to make. Whether you’re launching a new venture, expanding a current one, or simply in need of extra money to get through a tough season, assessing realistic timelines associated with funding sources will help you better plan for your business’s financial health.

If you’re looking for more tips on securing additional funding for your small business, contact the team at Currency for insights and guidance.

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