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SBA Express Loan: What Is It and How Does It Work?

SBA Express Loan

Small businesses are the lifeblood of the American economy. The Small Business Administration (SBA) reports there were over 28 million small businesses in operation in 2013. Starting and running a small business can require considerable resources to operate and return a profit. Small business loans are a common way for entrepreneurs to make operations possible. An SBA Express loan is one tool available to business owners who need access to a quick influx of cash to consolidate debt, finance equipment, or to cover some other need of the business.

SBA Express loans help business owners accomplish small to medium sized tasks without the typical extended wait time associated with other, more standard business loans. If you need access to funds to help run your business and are considering an SBA Express loan, keep the following in mind.

Characteristics of an SBA Express Loan

Time is of the essence when it comes to funding many small business projects. An SBA Express loan helps business owners get access to the money they need to finance different projects. As a business owner, you may not always be able to wait an extended period of time to secure the funding you need.

SBA Express loans provide an alternative to traditional business loans available at a bank or even through the SBA. Traditional business loans typically require additional paperwork or an extended period of time to get funding, which makes them less desirable to business owners who need to quickly fund a project.

An SBA Express loan, on the other hand, allows business owners to quickly access funds with less wait time. The following are some of the common characteristics of an SBA Express loan:

  • You can borrow up to $350,000 to finance a project
  • The lender is able to provide a lending determination within 36 hours
  • You may not need to provide collateral for loans less than $25,000
  • Lenders and borrowers can negotiate the interest rate
  • Interest rates are typically higher than with other SBA loan types
  • The maximum SBA guaranty is 50%
  • Lenders are empowered to make decisions, instead of consulting with the SBA
  • A revolving business line of credit is available for up to seven years
  • Funds are typically available within 45-90 days

As is obvious from the typical characteristics of SBA Express loans, they are geared towards a fast turnaround time. This can be of great benefit to a business owner needing funds, but it doesn’t come without cost to the owner. However, if you have a growing and profitable business, it can be a great use of leverage.

SBA Express Loan vs 7(a) Loans

Not every business owner needs quick access to funds. Additionally, many business owners may find they need more than $350,000 to fund a project, or they simply may want a lower interest rate than what is found with an SBA Express loan.

If you find yourself in that situation, an SBA 7(a) loan may be worth considering. SBA 7(a) loans are a traditional loan type offered by the Small Business Administration – in fact when you hear the term “SBA loan,” they are usually 7(a) loans. SBA 7(a) loans are commonly used for larger projects that require access to significantly more capital at a lower interest rate.

Below is a comparison of SBA Express loans and 7(a) loans.

SBA 7(a) Loan

-Maximum loan amount of $5,000,000

-Maximum interest rate of Prime + 2.75%

-Maximum SBA guaranty of 75-90%

-A collateral of at least 10% of the loan value is required

-Loans can be for up to 10 years, or 25 years, if the loan is being used to purchase commercial real estate

-SBA 7(a) loans require considerable paperwork, often resulting in the need to wait 2-3 months to get funds

-Response time for approval can take several weeks

-Lenders have less flexibility, relative to Express loans, as they must abide by the standards set by the Small Business Administration

SBA Express Loan

-Maximum loan amount of $350,000

-Maximum interest rate of Prime + 4.5 – 6.5%

-Maximum SBA guaranty of 50%

-No collateral is required if the loan is under $25,000

-Loans can be for up to seven years

-The paperwork is considerably less when applying for an SBA Express loan, relative to a standard loan

-A response is given within 36 hours of turning in loan paperwork

-Lenders are provided greater flexibility on approval, rates, and turnaround times

A comparison of 7(a) loans vs SBA Express loans reveals some stark differences. Express loans are quicker and may require little to no collateral, but you will have a higher interest rate. 7(a) loans have more extensive requirements, but they allow for access to more funds at a lower interest rate.

Eligibility for an SBA Express Loan

As with any potential borrowing situation, you need to know what is required to get the funds you want. In short, the SBA sets the eligibility requirements for an Express loan. While it is true that the lender in question is given greater flexibility to make the final lending decision, the Small Business Administration still sets eligibility requirements to get a business loan, and the eligibility requirements are, generally, fairly similar to those required to secure a 7(a) loan.

That being said, here are some of the eligibility requirements to keep in mind when applying for an SBA Express loan:

  • A credit score of at least 680
  • A debt-to-service-coverage ratio of at least 1:1
  • Positive, upward, revenue trends
  • Having a profitable business

The eligibility requirements for an SBA Express loan are quite simple, but one thing is obvious – your business must have growth and be profitable. Although lenders are given greater flexibility to extend the loan and negotiate the rate, they still want to make sure they are not exposing themselves to what would be considered bad debt.

If you have a growing business, and either are unable to qualify for a 7(a) loan or don’t need extensive funding, you may find you’re more than eligible to access funds through an SBA Express loan.

Benefits of SBA Express Loans

There are many options to consider when funding a small business project. You can choose from funding the project yourself to getting a loan through a bank, to getting an SBA loan, to getting an SBA Express loan. Each loan has its own points to consider, though when it comes to borrowing funds in a timely manner SBA Express loans are typically quicker, particularly when you can’t or don’t want to go through a bank.

Following are some of the benefits to keep in mind when looking at an SBA Express loan:

  • They are timelier. You can get an approval response within 36 hours and can typically get funds in a shorter period of time.
  • You may not need collateral if borrowing $25,000 or less.
  • The lender generally has more flexibility and authority on approving the loan, not to mention the ability to negotiate the interest rate.
  • You can use the funds for most anything you might need to do – purchase equipment, fund improvements, pay for costs related to expansion, etc.
  • The loan term is up to seven years.
  • Getting approval may increase your chance at an SBA 7(a) loan, or conventional bank loan, in the future.

While SBA Express loans do carry a higher interest rate, they have many benefits that make them worth consideration if you need access to relatively quick funding to expand your business. Just make sure to compare lenders to get the best rate possible for your borrowing needs.

Bottom Line

Running and growing a small business is expensive. In the right situation, an SBA Express loan can be a great way to fund your business needs and provide peace of mind that you have what you need to grow.


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