How long does it take to get a business loan

When you’re planning to boost your business with some extra funds, one of the first questions you might have is, “How long does it take to get a business loan?”

Understanding the timeline can help you plan better and set realistic expectations for your financial strategy. Here at Swoop, our experts wanted to provide a detailed explanation of this topic to guide you smoothly through your funding options.

How long does getting a business loan take?

A business loan can take anywhere from 24 hours to several months to secure, depending on various factors.

The type of lender you choose: Different lenders have different processing times. Online lenders might offer quicker approvals compared to traditional banks.
The complexity of your loan application: More detailed and complex applications might take longer to review and process.
How prepared you are with the necessary documents: Having all your documentation ready can significantly speed up the process.

Step 1: Applying

Initially, you’ll start with the application itself, which can be a straightforward process, especially with online lenders. Depending on the lender, this step could take less than 30 minutes if you’re well-prepared. The key here is to gather all necessary information beforehand to ensure a smooth and swift application process.

Information you need to supply:

When you’re applying for a business loan, you’ll need to provide a mix of both personal and professional information to your lender. Here’s what you should have on hand:

Personal information:

Full name and contact details
Social security number
Personal income and financial history
Personal credit score
History of any previous business ventures

Business information:

Business name and contact information
Business tax ID
Time in business
Annual revenue
Business plan
Profit and loss statements
Business credit score
Bank statements

Step 2: Underwriting

After you’ve submitted your application, the next phase in obtaining a business loan is the underwriting process. This critical step is where lenders assess your financial health and determine the risk involved in lending to your business. The goal for the lender is to ensure that you can repay the loan according to the terms agreed upon.

What is underwriting and what is it for?

Underwriting is the process by which a lender evaluates the risk of lending money to a borrower. In this phase, underwriters will review your application, credit history, financial statements, and any other relevant information to decide on your loan application. This scrutiny helps the lender mitigate risk and decide on the loan terms, such as interest rate, loan amount, and repayment period.

How long does it take?

The duration of the underwriting process can vary significantly depending on the lender and the complexity of your loan application. It can take anywhere from a few days to several weeks. Online lenders might expedite this process through automated systems, potentially giving you a decision in as little as a few hours or days. Traditional banks, however, may take longer due to a more detailed review process.

What happens from a lender’s standpoint?

From a lender’s standpoint, the underwriting process involves several key steps:

Credit analysis: Evaluating your credit score and history to determine your reliability as a borrower.
Financial review: Assessing your financial statements, including profit and loss statements and balance sheets, to understand your business’s financial health.
Collateral assessment: If your loan is secured, the lender will evaluate the value and adequacy of the collateral you’re offering.

Step 3: Funding

Once your loan application has successfully passed the underwriting stage and you’ve been approved, the next and final step in the business loan process is the funding stage. This is when you actually receive the money you’ve applied for, and it marks the beginning of your repayment period.

How do you receive the funds?

The method by which you receive the funds can vary based on the type of loan you’ve secured and the lender’s practices. Generally, the funds are transferred directly to your business bank account. This transfer usually happens electronically, ensuring a swift and secure passage of funds.

Is It dispersed all at once or in stages?

Lump sum: For many traditional business loans, the entire loan amount is typically disbursed as a lump sum. This means you receive the full approved amount all at once, right after the loan closing process is complete. This is common for loans intended for specific, large investments, such as purchasing equipment or real estate.

In stages: In contrast, some types of loans, particularly those meant for ongoing projects or operational expenses, may be disbursed in stages. This is often seen with lines of credit or construction loans, where you draw down the funds as needed up to the maximum approved amount. This approach allows you to manage cash flow more effectively and potentially save on interest, as you typically only pay interest on the amount you’ve drawn down, not on the total loan amount approved.

How to get a small business loan fast

If you’re needing money for your small business fast, you can use a lender that offers fast business loans with funding in as little as 24 hours.

Loans that can provide funding quickly

Some loan types and lenders specialise in expedited approval and funding processes, catering to small business owners who need access to capital without delay. Here’s what to consider:

Online lenders

Online lenders are typically able to process applications and disburse funds faster than traditional banks. They utilise advanced technology and algorithms to assess applications, which can significantly shorten the approval time. Some online lending platforms offer decisions in as little as 24 hours, with funds available shortly after approval.

Short-term loans

Short-term loans are designed for quick funding and repayment over a short period. These loans often have less stringent application requirements, which can speed up the approval process. However, they may come with higher interest rates due to the convenience and speed of access to capital.

Lines of credit

Business lines of credit offer flexible borrowing options, allowing you to draw funds as needed up to a set limit. While the initial approval process might take some time, once you’re approved, you can access funds quickly, often with the ability to draw from the line of credit multiple times as you repay it.

Merchant Cash Advances

For businesses with a high volume of credit card sales, merchant cash advances offer an advance on future sales. This option can provide funds quickly, sometimes within a day of approval.

It’s important to note, though, that this convenience comes at a cost, often resulting in higher fees and interest rates.

When looking for loans that can provide funding quickly always read the terms carefully and consider how the repayment schedule and interest rates fit into your business’s budget. Choosing the right loan product can provide the quick financial boost your business needs while maintaining its long-term financial health.

How fast can you get approved for a business loan?

Business loans can be approved and funded on the same day. However other loan types can take one to three months.

The timeline depends on the loan type and the institution you choose for your funding. If you’re pressed for time, ask up-front what the average time to fund is for your loan type. Have a discussion with your lender about your timeline and business needs to see if they can offer an expedited process to move your application through underwriting quickly.

Swoop offers expedited business loan types that can get you approved faster.

How to speed up the loan processing time

Here’s what you can do on your end to help quicken the application and ultimately the funding timeline.

Apply before the last minute

One of the key strategies to ensure a swift loan process is to apply well before you’re in dire need of the funds. Waiting until the last minute can not only add pressure but may also limit your options.

Lenders may take more time to approve loans under rushed conditions, and you might not have the luxury of shopping around for the best terms. Starting the loan application process early gives you the breathing room to handle any unexpected delays or requests for additional information.

Have all your information and documentation ready

Having all necessary documents and information ready to go is perhaps the most effective way to speed up the loan application process. Lenders will require a variety of documents to process your loan application, including but not limited to:

Business financial statements
Tax returns (both business and personal)
Bank statements
Business plan
Proof of ownership and business licenses

Do your due diligence with the requirements

Before applying, take the time to understand the lender’s requirements. Each lender has different criteria for credit scores, annual revenue, and time in business. By ensuring your business meets these requirements before applying, you can avoid the frustration of rejections that prolong your search for funding.

Research lenders: Look for lenders known for quick funding times. Many online lenders can process loans faster than traditional banks.
Understand the loan type: Different types of loans have different processing times. Identify which loan type suits your needs and offers the quickest turnaround.
Prepare a solid business case: A well-prepared business plan and financial forecast can expedite the underwriting process. It shows lenders that you have a clear plan for the funds and a strong likelihood of repayment.

Which factors can affect loan processing time?

The lender you choose, the type of loan, its purpose for your business and outstanding financial issues are some of the few factors that can have a major effect on your loan processing timeline.

Lender

The choice of lender is a significant factor in the duration of the loan processing time. Different lenders have varying processing speeds:

Traditional banks: Often have more rigorous application and approval processes, which can take weeks or even months.
Online lenders: Typically provide faster processing times due to technology-driven assessment methods, sometimes approving loans within a day or two.
Credit unions: While generally offering favorable rates, credit unions may have processing times that are similar to traditional banks, depending on the internal capacities and technologies they use.

Type of loan

The type of loan you apply for can also affect how long it takes to get processed:

Long-term loans: These are typically larger and may require more extensive credit and risk assessments, leading to longer processing times.
Short-term loans and lines of credit: These options may have quicker processing times due to their typically smaller sizes and shorter repayment terms.

Loan purpose

The purpose of the loan also plays a crucial role in the approval process:

Working capital: Loans intended for operational purposes might be processed quicker than those for more complex uses.
Equipment financing: Loans for purchasing equipment may require appraisals and additional documentation, potentially extending the processing time.
Real estate: Loans for purchasing real estate are typically larger and involve property appraisals and legal documentation, which can significantly delay the approval process.

Undisclosed financial issues

Lastly, any undisclosed financial issues can cause delays in the loan processing time. These might include:

Credit score problems: Low credit scores or unexplained dips in your credit history may require additional scrutiny.
Outstanding debts: High levels of existing debt or issues like liens and judgments can complicate the approval process.
Past bankruptcies: While not always a deal-breaker, bankruptcies need to be disclosed and can require additional documentation and explanations.
New accounts: You may want to avoid attempting to open additional accounts, credit cards, or anything that could trigger your credit while you’re in underwriting.

How Swoop can help

Don’t let the process of getting a business loan slow down your business growth. Visit Swoop to explore your potential funding options and see how easy it is to find reliable loans tailored to your business needs. Whether you’re just starting out or looking to expand, Swoop is here to help you get the financing you need efficiently and effectively.

Check available funding options with Swoop and take a significant step towards securing your business’s financial future today.