IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses.  The following blog has been provided by Charles Wheaton of First Internet Bank  (https://www.firstib.com/):

A Roadmap to Getting Your SBA Loan Funded Timely

When securing a Small Business Administration (SBA) loan is the one thing keeping you from making your goals a reality, it’s only natural to wonder how quickly you can receive your SBA-backed funding, once you apply and are accepted.

The answer isn’t a simple one. A number of variables are involved…and no one answer is “right”. If you’re working with a knowledgeable broker or directly with a Business Development Officer (BDO) from a Small Business Administration-approved lender, the time from application to closing can potentially be measured in weeks. Conversely, it can take months if the proposed loan must be approved by the SBA prior to underwriting. The actual time period generally falls somewhere in between.

Fortunately, a number of those variables are controllable by taking a proactive approach. So, here are some ways you can keep the process continually moving forward:

• Preparing thoroughly in advance
• Determining the loan amount you’ll need
• Working with experienced advisors
• Finding the best SBA 7(a) lender for your needs
• Promptly responding to information requests
• Partnering with your lender to stay ahead of potential “bumps”

Advance preparation is the key

Before the actual loan process can get underway, it’s critical that you not only begin to collect the documentation you’ll need for application, but determine as accurately as possible the actual amount you wish to finance. There are many things that you can prepare in advance:

• Credit rating
• Personal background
• Business structure

Lenders will also require additional details; the requirements and length will vary from lender to lender, but there will more than likely be requests for these items:

• Business plan
• Statement of intent
• Business history
• Current debts (business and personal)
• Amount of personal financial stake
• Percentage of business ownership
• Franchising disclosure and agreement (if applicable)

Determining what you need to finance

If the loan is used to purchase a business, a business valuation is required. Purchasing, constructing or refinancing commercial real estate? An appraisal and environmental report are required. These reports can take anywhere from 1-4 weeks and are handled by a company separate from the lender. For construction or major renovation of a standalone building, building permits and estimates need to be acquired before closing. All of these will provide a realistic overview of costs and enable the determination of the required loan amount.

Getting advisors involved early

Closing delays often occur as a result of a business owner’s accountant, lawyer, insurance agent or other advisors who are slow to respond or provide vital documentation. Solicit their involvement early in the process – it will make your life – and theirs – easier, and closing can happen more efficiently.

Finding the right SBA lender

Even though SBA rules and regulations are the same for every participating lender, significant differences can still appear. The most obvious difference is in the rates offered by individual financial institutions (remember, the SBA doesn’t actually extend loans), but bear in mind that not all banks offer the full range of SBA loans and their internal rules may limit the industries and types of projects they are willing to fund.

Banks can also differ significantly in the time it takes to secure funding through the SBA. An SBA Preferred Lender is given leeway to make lending decisions without submitting the full package to the Administration for consideration and approval. This can save weeks in getting to closing.

Finally, be sure that the institution you choose has a dedicated team of experts to process SBA loans. Their experience and expertise will help move the project along efficiently, even when the occasional snag arises.

Timely response to lender requests

Every day that goes by without responding to a lender’s request for information delays the loan closing by at least that long. With SBA lending, questions always arise that are specific to the loan and borrower. While SBA 7(a) lenders are waiting for answers, they are unable to complete certain tasks and/or make decisions on how to proceed. Also, many times, the information provided may trigger additional questions. Be prepared to respond to requests right up until closing.

Working with your lender to anticipate potential issues

Many of the potential bottlenecks that can delay closing are common to all SBA 7(a) loans. These include having to order appraisals, business valuations and/or environmental reports, along with surveys and getting life insurance approved, then assigned to the loan. There are just as many issues that arise because business owners don’t properly disclose certain items. Some examples are lawsuits, past due taxes or tax payment plans, not filing taxes, undisclosed loans, undisclosed owners and changes in project costs. The best way to help mitigate these time wasters is to make sure to let your lender know anything you believe might have a bearing on the financing. It is highly likely your lender will discover it somewhere in the process (usually during the final part of closing) and it could seriously jeopardize the timing of your closing or the ability to close at all.

Addressing these items will greatly increase chances of closing the loan within 60 days (calculated from the time the loan is submitted to underwriting). It is important to bear in mind that unforeseen issues beyond the ones noted here do arise, which can also delay closing. If everything the lender has requested has been addressed, however, it is more likely any remaining issue can be resolved so that closing will be accomplished in a timely manner.

As a Preferred SBA lender, First Internet Bank can keep loans moving smoothly from application to closing. Want to learn more?

If you have questions relating to the content of this article, Charles Wheaton, a Senior Business Development Officer and Vice-President at First Internet Bank, would welcome inquiries. Charles can be reached at (206) 947-1277 and cwheaton@firstib.com.

 IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.