How Long Does It Take To Get A Business Loan From A Bank?

Image by GettyImages; Illustration by Bankrate

A small business loan from a bank can be an excellent way to fund growth or manage cash flow, thanks to competitive rates and flexible terms. But banks aren’t known for quick approvals.

So, how long does it take to get a business loan from a bank? The timeline can vary—from under an hour to over a month—depending on the lender, loan type, and how prepared you are when applying.

Knowing what to expect, including the documents you’ll need and the factors that affect timing, can help you move through the process more efficiently and access your funds faster.

Loan process for banks and credit unions

Here’s a brief overview of the loan process for banks and credit unions:

• Submit your small business loan application.
  

  Submit your loan application and documentation to your chosen bank or credit union.

• Underwriting.
  

  When you apply for a loan from a bank or credit union, the loan goes through a process called underwriting.

  During underwriting, the lender examines your application, your financial information and any other details it can find about you and your business. It then decides how likely you are to pay back (or default on) the loan. Based on the perceived risk, the bank decides whether to approve the loan and what interest rate to charge.The lender will also check your credit report and review the required documentation, which may include:

  • Business formation documents
  • Income statements
  • Bank statements
  • A business plan
  • Proof of collateral (if applicable)

• Approval.
  

  Depending on the information you provide and the contents of your credit report, the lender may make a decision or ask for more information to determine whether to approve or deny your funding request.

If your business is new or is on the cusp of qualifying for a loan, the lender might ask for collateral or for you to sign a personal guarantee. The lender may also ask for more financial history or other supporting documents. Make sure all the info you provide is accurate, and be as responsive as possible to help this process go quickly.

Factors that influence loan processing time

How long it takes to get a small business loan from a bank varies. Let’s take a look at the factors that play a role.

The lender you choose

The lender you choose is possibly the most important in determining how long it takes to get a bank small business loan. Each lender has its own application process, documentation requirements and timeline for reviewing and approving loans, which can significantly impact how quickly you receive a decision and funding.dfs

Online lenders generally work faster than banks or credit unions, but processing times can vary even within the same type of lender.

The type of financing you want

Which type of loan you apply for also impacts the length of the underwriting process. SBA loans can take anywhere from 30 to 90 days to receive funds. On the other hand, short-term working capital loans can get funded within a week at the right bank or as soon as the next day with some online lenders.

In general, smaller loans have shorter processing times than larger ones. Also, adding complexity like collateral, which the lender needs to examine to assess its value, can lengthen the process.

Your borrower qualifications

Your creditworthiness will also impact the speed of the lending process.If you have a long history of running your company successfully, a strong level of profit and cash flow, stellar credit and no other debts, it won’t take long for lenders to review and approve your application.

On the other hand, if your credit score is fine but not great, your business has a short history, and your revenues fluctuate a lot, the lender may take more time and ask for more information when assessing your application, slowing down the process.

How quickly you get the documents together

When you apply for a loan, the lender will ask for basic documents, like financial statements and revenue reports. But the lender may ask for additional information as it goes through your application.

If you’re applying for an SBA loan, there are forms — like Form 1920 — that must be provided along with the loan documentation and application. The lender won’t move the process forward until you provide that additional documentation, so the faster you can get the documents together, the faster your loan will get processed.

When you apply

Most lenders process loans on business days, which are Monday through Friday. Applying for a loan early in the week can help it get processed faster because the lender can start working on it immediately. Applying on a Friday, weekend or before a holiday will slow things down.

Bottom line

Applying for a loan and getting it funded can take time. Knowing how long it will take can help you decide on the right time to apply to make sure you have the funds available when you need them.To speed up the process, try to present yourself as a strong borrower and be responsive to requests for additional information. Even if you’re looking to get a quick loan, don’t forget to take the time to shop around and look for the best deal.

Frequently asked questions

• How fast is a bank loan?
  

  Bank loans and credit union loans take longer to process than online loans. Expect it to take a few days to weeks to get a loan from a bank.

• Are banks easier to get loans?
  

  Banks typically have stricter requirements for businesses that want to borrow money. Online lenders may be easier to borrow from, but they charge high rates and fees for companies with imperfect credit.

• Why would a bank deny a business loan?
  

  Banks could deny a business loan for many reasons, such as the company not having a long enough operating history, poor credit, insufficient assets to serve as collateral, or not having consistent cash flow to use to repay the loan.