How long does it take to get a small business loan from a bank?

The timing of a loan from your bank will vary from case to case. However, if you estimate the process to take at least a week, then you won’t be too surprised.

It really depends on a handful of variables. Your lender and type of loan can play into processing time.

The best tip I can give you is to have your paperwork in order before applying. The more prepared you are, the shorter your wait time will be.

If you need a loan to cover a cash shortage or business growth, your bank should offer you a low rate and fair terms. The downside? It can take some time to process the loan (usually about a week). This isn’t a set-in-stone rule, so don’t go planning like you’ll have your money tomorrow.

And don’t forget about waiting for the money. You’ll want to consider the time leading up to approval, plus additional time to fund your loan.

The Underwriting Process

If you choose to borrow from your bank, there are steps involved before you get a loan. The typical steps include application, underwriting (a review of the potential risk that you may not repay the loan), and approval. During the underwriting process, the bank evaluates your risk and that determines your rate. Once your business loan is submitted, it’s passed on to underwriters who review the application, your financial statements and other business information you provided. This group of folks may then ask you to provide additional information to them before they decide on your application.

Your lender will review a copy of your credit report and the documentation you submitted with your application. Some of the documentation it looks at is proof of collateral if applicable.

Don’t be alarmed if your bank requests collateral or that you sign a personal guarantee for your loan. If you have a newer or borderline business, they may ask. And if you provide information accurately and respond promptly, you’ll be in good shape. The bank will consider five factors they call the ”C’s” of underwriting: character, capacity, capital, conditions of the market and collateral. Character is reliability. Capacity is your ability to repay. Capital is liquid assets. Conditions of the market. And collateral is pledged assets. Don’t panic. They just want to make sure you have the means to repay the money they loan you.

Processing Time

How long the loan process will take depends on the factors below.

When you consider a loan, your particular lender may matter the most. Online lenders are generally faster than traditional institutions like banks or credit unions. But the same speed doesn’t apply to everyone - even similar lenders can vary.

If the SBA is an option, great! But these loans can take 30 to 90 days to fund. But with some online lenders, a short-term working capital loan could potentially fund as quickly as the next day. Along with the type of loan, the size can impact processing time. Generally, a smaller loan will process faster than a large loan. It also depends on if collateral is required. Processing collateral takes longer because it has to be valued.

A borrower who has been in business for a long time, with strong cash flow and a good credit rating will be reviewed faster than a new business or one with questionable cash flow. Everybody’s different, but things like middle-of-the-road credit or unpredictable revenue could cause some pauses at the lender’s end. Why? Because they may ask for more information, which will slow things down a little.

You can expect to provide a lender with financial statements and revenue reports. On occasion, they might also want to see additional documents midway through the review. If you apply for an SBA loan, you’ll need things like Form 1920. The lender will wait for the documents and then after receipt, the application will be processed. In most cases, the sooner you give the lender what it needs, the sooner they can process your loan.

Contacting lenders at the start of the work week typically will get your application processed faster. Here’s a tip: Don’t submit an application on a Friday, over the weekend or before a holiday when you plan on getting a loan. Lenders have weekends and holidays too, you know.

Being prepared sounds cliché, but the faster you can answer a lender’s questions, and provide them the documents they need, the faster you’ll be funded.

Online Loans Are Faster than Bank Loans

Need a loan, stat? The key here is to determine whether you can wait, because banks typically charge less interest and fees than online lenders. If you can’t wait, though, your online application often requires little paperwork, and you could have your money the same or next day. Online lenders often have looser guidelines than banks, which is partly why they move faster. But the online cost is often higher.

Don’t assume what you get at one lender means you’ll get at another. In fact, at Bank of America, you often apply in branch or by phone and sometimes it can take days for a decision.

At Bluevine, on the other hand, a line of credit application can be submitted online; the decision can be made in minutes. If approved, funds are deposited in as little as 24 hours.

If you’re in a hurry, take a minute to compare offers from several places. If you’re not up to your eyeballs in debt or you’ve got time on your side, don’t write off a bank as your solution. And remember, just because they’re not lightning fast doesn’t mean they’re no good. If the rates are low and the terms are fair, it can be the right lender for you.

A bank loan may take anywhere from several days to several weeks.

Bank loans are also harder to qualify for. If you think you can’t make it past a bank’s lending criteria, use an online platform, but only if you can afford it. Online lenders may be easier to qualify with, but borrowers with weaker credit profiles can end up paying heavy costs.

These are reasons why a bank might turn you down: You have a limited operating history, poor credit score, insufficient collateral and irregular cash flow.