What happens after you submit an SBA 7(a) loan application through closing?

Filing your application for a business loan under SBA 7(a) is only the first step. After you’ve applied, the lender and the SBA have to review and approve it, and once they do, you can move on to closing and funding. Don’t be surprised, though, if you still have another stack of forms and documents to sign at closing.

The Underwriting Process

You may have heard the term “underwriter.” The underwriter is someone who checks that the information you gave the bank was correct, and who balances the risk of funding your business against that information.

There are two questions an underwriter will ask:

• First, how risky is your loan relative to the lender’s own profile.
• And second, how to limit losses if you don’t pay back.

Importantly, before anything the lender has to show that you couldn’t have qualified for an acceptable loan without an SBA guaranty, and also that the business’ and the owners’ own resources couldn’t cover some or all of the loan.

The underwriting process can take up to a few weeks, then you might get a commitment from the lender to lend to you as long as you meet the lender’s credit requirements, but you might still have to turn in a few more documents before your loan gets funded.

That commitment comes as a letter saying the amount you can borrow, the interest rate, collateral, and other terms. Read it carefully, because signing it means you accept the offer.

After the lender says yes, the file goes to the SBA, which has streamlined its programs over the years. Preferred Lenders submit many of the loans electronically and receive an answer immediately.

Once the SBA approves the loan it goes to closing, which pulls together the SBA loan and title work and some other forms.

Before Closing, There Is Paperwork

You might think after all that paperwork you did to get approved you’d be done - nope. Before closing, there is paperwork, some forms are always required, and some are specific to you.

• The full set of corporate documents
• All licenses for your business
• Notes from the shareholders, if required
• The purchase agreement, with all amendments and extensions and non-compete agreements
• An appraisal if the loan involves commercial real estate
• Environmental due diligence, if required
• Copies of any leases
• Recent mortgage statements
• A business valuation report, if applicable
• A draft bill of sale, if applicable
• All corporate documents related to the change in ownership
• The landlord waiver, if needed
• A complete list of the equipment, including invoices and titles
• If refinancing, the notes being refinanced, payoffs, and 12-month payment history
• Any and all documents about your equity injection
• All insurance policies applicable to the loan
• Any additional lender forms
• The IRS 4506c form
• The SBA 159 form

The list above is not necessarily complete, you’ll have to see your lender for the precise amount of documentation your loan needs.

Closing Requirements

After that, it’s closing. You sign documents, the lender funds the loan. Every SBA loan has lots of closing requirements for both sides. Here are the key ones, but not all:

• The promissory note you sign: Origination date, loan amount, interest rate, maturity date, collateral
• The security documents signed and filed with the government to perfect the lender’s lien on collateral
• Insurance documents that cover the title, collateral, and the life and ability to work of the borrower(s)
• SBA documents: the full application package, lender’s underwriting, third-party professional reports

And that’s it. After the paperwork and all of the lender’s work is done, it’s time for you to put the money to work, opening a new business or expanding yours. Good luck.