Here’s the ideal scenario: After successfully working through the application process, you’re approved for an SBA loan. Your closing date is approaching fast, so you sign and return all the required documents and soon, you have the funds in the bank to grow your business!
In reality, the SBA loan closing process can be slightly more complex than conventional loans. Closings face delays, and oftentimes, it’s because the borrower wasn’t prepared or didn’t respond to lender requests quickly.
In this article, you’ll learn the basics of the SBA loan closing process and the essential role that borrowers play. The net result? Efficiency and responsiveness always win.
The basics of the SBA loan closing process
The closing process is the final step in your SBA loan process before funds are dispersed to you or your vendors. It includes some documents that are new to you, while others are required updates to documents that you had previously submitted.
With all the pieces in place, the closing process is relatively quick – but ultimately, that depends on how responsive and efficient you are as the borrower.
During the SBA loan closing process, there are several documents that must be submitted. It’s important to be responsive throughout the closing process because the longer it takes for you to sign the closing documents, the longer it takes for you to receive your funds.
Often, there are time-sensitive documents or covenants that prevent your lender from moving forward if they’re not submitted quickly. Delayed funding can derail plans, whether that’s postponing a long-planned launch, putting upgrades on hold, or losing opportunities to secure business-boosting essentials (such as hiring staff or securing a lease).
The loan you applied for might not be the best fit for your needs
Sometimes, if you applied for a specific term loan, your lender may determine that a different loan or a line of credit is a better fit for you. As a result, you may need to submit different required documents to successfully apply for the loan.
For example, your lender may find that another loan product has a better interest rate or longer repayment period than another, giving your business greater flexibility. These changes should be communicated to you by your lender during the approval process. In addition, you’ll receive information that outlines any required documentation and signatures needed prior to closing.
Although closings for lines of credit will vary compared to term loans, it’s still important to read any and all communications from your lender and to respond in a timely manner.
Key points for a smooth SBA loan closing process
Leading up to and during the closing process, you’ll be asked to submit and/or sign numerous documents. Some of these may be updates to information that you previously submitted and some will be new. While it’s important to review all the documents you receive, you can keep the process moving forward by reviewing and submitting everything as soon as possible. Otherwise, if you miss the deadline, you’ll delay your financing and, in a worst-case scenario, the documents could be voided.
Here are the key points for an efficient and successful SBA loan closing process:
- After your loan has been approved, your loan documents will provide a deadline. It’s critical to read and sign the documents by or before that date, which is typically 30-60 days from the date of your loan’s approval. Given this, as soon as you receive the documents, please read and sign as required by your lender(s).
If you’re delaying because there are things that you don’t understand, contact your lender and/or attorney immediately to have the information explained more thoroughly. Lenders know that the information in the documents can be intimidating due to the legal language that’s required. Please know that lenders are happy to have the opportunity to clarify the information so that you understand and are comfortable moving ahead with the closing. - As soon as you’ve read the documents and feel that you have a good understanding of the terms, sign and submit the documents before the deadline. Be sure that you’re submitting them as required – some documents can be digitally signed and submitted, but some documents still require handwritten signatures.
- By the time you receive your closing documents, you’ve already been through the hardest parts of the process – the application, underwriting, and approval stages. Unless your plans have changed and the funds are no longer needed or desired to grow your business, delaying the closing of the loan only works against you and your business.
- If you don’t sign and return the documents by the deadline, depending on your lender and closing documents, your loan’s approval could become null and void, preventing the lender from giving you the funds. Even if the lender can be flexible and work with you on a solution, the longer it takes you to sign your closing documents, the longer it will take for your lender to provide or disburse the funds.
- In cases where your lender(s) take real estate as collateral – such as with some SBA 504 or SBA 7(a) loans – you could be working with several lenders on your project. Some or all of them may have stipulations that specify the lien position required for real estate used as collateral. If you delay signing the closing documents, a lender in a lower lien position could file before a lender in a priority lien position. This can have a negative impact for lenders, and as a result, the deal may be voided, leaving you without the funds you need.
Pursuit will be with you every step of the way
Every day, Pursuit works with business owners to make the loan process as efficient as possible, from our first meeting through your closing, including the SBA loan closing process. With more than 15 small business loan options and a line of credit, we can help you find funding that fits your needs and successfully navigate the loan application and closing processes.
Reach out to us today to learn more about how we can help you.
