SBA Express Loans 101: What Businesses Need to Know

by Kieran Daly
June 20, 2023
SBA Express Loans 101: What Businesses Need to Know

For small business owners seeking funding to grow their companies, SBA Express loans can provide you with a capital boost of up to $500,000. Unlike other types of SBA loans, these small business loans have a much faster turnaround time, meaning you can get your hands on the capital you need faster in some cases.

In this article, we cover:

  • What SBA Express loans are

  • Who can apply for SBA Express loans

  • How to apply

What Are SBA Express Loans?

With an SBA Express loan, the maximum loan amount is $500,000. SBA Express Loans can either be a standard term loan or taken as a line of credit.

The reason that it’s an “Express” loan is that the SBA responds to your initial application within 36 hours. That’s in contrast to, for example, an SBA 7(a) loan where the turnaround time can be 5-10 days.

SBA Express loans are a joint venture between the U.S. Small Business Administration (a branch of the federal government) and financial institutions.

Loan Terms

Repayment terms differ depending on the reason you need the capital. You can pay back over:

  • 25 years for real estate loans

  • 10 years for inventory and equipment purchases or working capital

  • 10  years if you use it as a revolving line of credit

Similar to when you take out a mortgage, you’ll need a down payment equivalent to at least 10% of the amount you wish to borrow.

Interest Rates

Interest rates are competitive because of the way that SBA Express loans are structured. 

The SBA guarantees 50% of the money you borrow. This gives the financial institutions that fund the loan much greater security and that’s reflected in the rates offered on SBA Express loans.

This guarantee is not as generous as SBA 7 loans where the SBA offers guarantees of 85% on loans of up to $150,000 and 75% on loans above.

Although the bank or credit union funding the loan can set the interest rate on your loan, they have to operate within certain limits. To participate in the scheme, lenders can’t charge more than the prime rate plus 6.5% of loans of less than $50,000 or the prime rate plus 4.5% on loans higher than $50,000.

Who Can Apply for an SBA Express Loan?

Only for-profit businesses may apply for an SBA Express loan. 

And there are other eligibility requirements as well. You’ll need to meet the SBA’s classification of a small business, which they calculate based on your sales and number of employees. 

In addition, the SBA will want you to have applied for funding elsewhere first but have been refused. The private lender you approach will also have their own eligibility requirements on factors like company net worth, annual revenue, or credit score.

Startups can apply for funding, but please be aware that the final decision on whether you get the loan is with the bank or credit union you approach. They may want a minimum of two years of operation.

Certain types of businesses — such as gambling establishments or pyramid sale distribution plans — aren’t eligible for an SBA Express loan.

What Can You Use an SBA Express Loan For?

You can specify one or more of the following business purposes on your SBA Express loan application:

  • Business expansion

  • Business purchase

  • Commercial real estate purchases

  • Construction or renovation costs

  • Contract performance

  • Export financing

  • Operational expenses

  • Purchase of equipment, furniture, machinery, materials, or supplies

  • Purchasing inventory

  • Seasonal financing

  • Setting up a business

You can also apply to refinance any existing loans.

There are conditions, however. The business loan that you’re refinancing should be for a purpose that would pass SBA lending criteria. In addition, the loan must put your business in a better position than it would be in without the money. Underwriters will look for evidence of this in your proposal so you’ll need to show how it will help your business grow, take on new staff members, and so on.

You can’t borrow the money to pay off delinquent taxes or pay for a partner’s shareholding if they wish to leave.

Applying for an SBA Express Loan

To request an SBA Express loan, first, you need to find an SBA preferred lender. The SBA has a handy Lender Match tool to help with this, or you can reach out to your local SBA district office for help.

Next, fill out and submit the correct borrower application forms. In this case, you need an SBA Form 1919. (This is also the form used for SBA 7(a) loan applications.) Shareholders with a stake of 20% or more in the business must sign the SBA Form 1919 as well.

You’ll need to present exactly what you’ll use the loan proceeds for.

Expect to be asked for financial projections as part of the loan application process. If you run an existing business, your lender will want to see financial statements, cash flow projections, and more. You’ll also be required to submit relevant tax returns (both personal and business) to demonstrate financial stability and responsibility.

Once this is done, submit your application and wait for an answer from your lender. The turnaround time is generally just a few business days. While they’re assessing your application, they’ll also submit your plan to the SBA to get their decision on whether they’ll guarantee 50% of your loan.

If your application is approved, you’ll need to sign the loan agreement and pay off any closing costs. Shortly after, your lender will transfer funds to your account.

SBA Express Loans FAQs

Here are the answers to two of the most frequently asked questions about SBA Express loans.

Are There Fees on SBA Express Loans?

Yes, there are fees for SBA Express Loans, and they’re charged to the lender by the SBA. However, the lender can pass these fees on to you if they want, and they often do.

The SBA charges these fees to lenders across its entire loan program. The only exception is for veteran-owned businesses applying for an SBA Express Loan of up to $500,000.

Lenders can charge fees such as processing fees, application fees, and origination fees to borrowers, as long as they are “reasonable and customary” for similar loans in the market. Lenders must disclose these fees to you and obtain your consent before charging them.

The SBA charges an upfront guaranty fee and an annual service fee on the loans they guarantee under the SBA loan program. The upfront guaranty fee is a one-time cost paid at closing (when the loan is paid to you).

The annual service fee is an ongoing fee paid by the lender to the SBA based on the guaranteed portion of the outstanding balance of the loan. These fees help cover the estimated costs of the 7(a) loan program. Again, your lender may pass these charges on to you.

For SBA Express loans where the repayment period is more than 12 months, the fees charged to partner financial institutions are as follows:

  • For loans of $350,000 or less: 2% of the guaranteed portion

  • For loans of $350,001 to $500,000: 3% of the guaranteed portion.

On short-term loans with a repayment period of up to 12 months, the SBA charges 0.25% of the guaranteed portion.

What Is the Easiest SBA Loan to Get Approved For?

The easiest SBA loan to get approved for is the SBA Express loan. This type of loan has less stringent requirements and shorter processing times than other SBA loans. This makes it a suitable option for those looking to get approved quickly.

SBA Express loans also offer competitive rates and flexible terms compared to commercial sector loan products.

Get the Funding You Need

The SBA Express Loan could be a good choice for many businesses. There’s a quick turnaround, low down payment requirement, and the SBA guarantees half the amount of money you borrow. But the SBA is not your only choice.

For even faster turnaround and no requirement for a down payment, Backd offers two different business financing options:

Apply in just three minutes today to get the financing you need as soon as tomorrow.

What would you do with the right amount of capital?

Working Capital Advance

Easy payment structures offer amounts with fast turnaround, Simple and easy process to access working capital.

  • Flexible - no collateral required
  • $10K - $2M
  • Terms up to 16 months
  • Automatic daily or weekly, or semi-monthly payments

Business Line of Credit

Get instant access to revolving credit with unlimited terms, and the best rates for your business.

  • Draw funds anytime
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  • Soft credit pull that doesn't affect your credit score