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Cafe owner talking on the phone while doing paperwork" width="2121" height="1414" />Nora O'Malley covers small business finance and entrepreneurship topics for The Balance. Along with her writing work, Nora is an entrepreneur and consultant who opened an all-tap wine bar in New York's East Village dubbed Lois and owns a sophisticated snack food business Aida. For her businesses, Nora is responsible for finances, marketing, operations, and fundraising. Along with The Balance, her writing has appeared in Thrillist, Insidehook and Vinepair.
Updated on January 21, 2022 Reviewed byPeggy James is an expert in accounting, corporate finance, and personal finance. She is a certified public accountant who owns her own accounting firm, where she serves small businesses, nonprofits, solopreneurs, freelancers, and individuals.
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The 7(a) loan program is the Small Business Administration’s (SBA) most common product and provides flexible financial assistance to small businesses. SBA Express loans fall under the 7(a) loan umbrella, and are meant to reduce red tape and give established businesses expedited access to smaller amounts of capital.
For small businesses looking to grow quickly, the Express loan can be an important source of funding worth considering. Learn more about what this loan program entails and how to qualify.
SBA Express loans are a subset of the 7(a) loan program. While they are very similar to standard 7(a) loans, as the name suggests, Express loans can expedite and streamline the process of acquiring lines of credit or working capital.
Similar to many other types of SBA loans, Express loans are issued through a qualified lender, such as a bank or a credit union. These loans or lines of credit are for smaller amounts than a standard 7(a) loan (maximum $350,000) and can carry slightly higher interest rates.
Unlike other SBA loan applications, which may take between five and 10 days to process, businesses should know the status of their Express loan application within just 36 hours.
This can be highly beneficial to business owners that need to quickly access capital, purchase equipment, or acquire real estate.
Before you apply for an SBA Express loan, there are certain specifics to consider, which are detailed below.
The SBA temporarily raised the maximum amount of Express loans to $1 million during the pandemic, but as of October 2021, the cap has returned to $350,000.
With Express loans, the SBA allows lenders to determine and negotiate the interest rate, but the rate may not exceed the SBA maximum; in the case of loans totaling $50,000 or less, the maximum interest rate may not exceed the prime rate + 6.5%. For loans over $50,000, the interest may not exceed prime + 4.5%.
SBA Express loan terms are the same as standard 7(a) loans, meaning loans for working capital or equipment mature within five to 10 years, and the maturity for real estate loans is 25 years. Lines of credit, however, mature at a maximum of 10 years.
Though these loans are approved (or denied) quickly, you still must go through the loan underwriting process with your chosen lender, which can sometimes take weeks.
These loans are only guaranteed up to 50% by the SBA and, unless you are a veteran-owned business, you will have to pay a guaranty fee to both the SBA and the lender depending on the amount of the loan.
In order for a small business to be eligible for an Express loan, it must meet certain requirements from both the SBA and the individual lender.
Individual lenders will likely also have their own requirements for approval and for determining interest rates. Generally, these factors can include strong personal credit scores and credit histories, evidence of fiscal responsibility, and/or guarantors.
Though collateral is not required by the SBA for loans under $25,000, most individual lenders will likely require some form of collateral for loans of higher amounts.
The SBA also offers an Export Express loan under the 7(a) program, which makes financing available for direct or indirect export development activities. Applicants for the Export Express loan must have been in business for at least 12 months and be able to demonstrate that they will use the funds to enter a new or expand in an existing export market. These loans are available up to $500,000, are guaranteed up to 90% for loans of $350,000 or less, and have the same term limits and fees as the standard Express loan.
Out of the many loan products that fall under the 7(a) umbrella, the basic 7(a) and the Express loan are some of the most popular. Though they both have similar requirements for eligibility and how a business can use its funds, the borrowing limit for the 7(a) loan is up to $5 million with up to 85% guaranteed. Additionally, the interest rates for the 7(a) loans are slightly lower and vary based on loan amount and loan terms. 7(a) loans, however, have a great deal more paperwork, as well as a much longer turnaround time for both approval and delivery of funds as compared to the Express loan.
As discussed, Express loans are subsidized loans provided via an authorized lender, such as a bank. The traditional process is able to be expedited because, while still under the supervision of the SBA, each lender uses its own documentation, analyses, policies, and procedures for processing SBA Express loans.
While each lending process is unique, all applicants with more than 20% ownership will need to fill out Form 1919 SBA 7(a) Borrower Information Application, as well as provide copies of tax returns, proof of income, net worth, and information regarding any necessary collateral to the lender.
Not every lender, nor every type of SBA loan, will fit your business perfectly, so it’s important to plan for your capital needs before they become an emergency situation. Doing so will allow you time to shop around for the best interest rate and the best lending partner to help walk you through the process and become a resource for the life of your loan.
Once an application is filed, applicants for an SBA Express loan will have a response from the SBA within 36 hours. The underwriting process leading up to submitting the application depends on the chosen lender’s procedures and can take anywhere from seven days to a few weeks.
Many large and small banks, as well as individual financing institutions and local credit unions, facilitate SBA Express loans. Exploring the 100 most active lenders is a good place to start searching for a lending partner.
