Key takeaways
The timeline to get a bank business loan varies, but expect it to take at least a week
Several factors influence bank loan processing, including the lender and type of loan
Gathering the required loan documents before applying can speed up loan processing
Loans are an important source of funds for small businesses. Whether you’re trying to get through a cash crunch or need money to grow your business more quickly, a loan can help.
Business loans from banks are known for having low interest rates and favorable terms. But they’re not known for getting you cash quickly.
Since bank loan processing time is influenced by factors such as the lender, the type of financing and documentation, don’t expect to see your cash the next day.
Keep reading to learn more about bank small business loans and why it takes time to get approved and receive funds.
How long does a bank small business loan take?
Banks are not known for fast loan processing. From the moment you submit the application and required documentation, most small business bank loans can take a week or more to approve your application. After approval, receiving your loan funds in your business bank account will also take time.
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.
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.
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
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. They may also ask for more financial history or other supporting documents.
Make sure all of the info you provide is accurate, and be as responsive as possible to help this process go quickly.
The five C’s
During underwriting, lenders also look at the five C’s of your business. These are characteristics that indicate your company’s ability to pay its debts.
The five C’s are character (trustworthiness), capacity (financial ability), capital (liquid assets), conditions (market factors) and collateral (assets securing the loan). Ultimately, a strong credit history, sufficient cash flow, assets, favorable market conditions and collateral enhance your loan approval chances.
Factors that influence loan processing time
How long it takes to get a loan 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 loan. Different lenders have different loan processing times.
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.
Bankrate insight
If you want to expedite bank business loan processing, it’s best to prepare all required documents in advance, ensuring everything is accurate and up-to-date. Additionally, once you apply, be sure to respond promptly to any inquiries from the lender.
Alternatives to small business loans from banks
If you need cash quickly, you may prefer to work with an online or alternative lender for your loan rather than a bank or credit union.
While banks and credit unions tend to have better rates and fewer fees, online and alternative lenders offer fast business loans, approving and funding loans the same day or the next day. This is due to the streamlined online application process that often requires minimal documentation and less stringent lending requirements.
For example, if you want a loan from Bank of America, you often need to apply in person at a branch or over the phone. It can then take days for the bank to process the application and make a decision.
On the other hand, Bluevine is an online lender that offers lines of credit. The application is relatively quick, and you can usually get a lending decision within minutes. You can access the funds in as little as 24 hours if approved.
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
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.
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.
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.
