Most of the time, small business owners are curious about the process of applying for a loan. They often have many questions about the various steps involved in the process, such as how long it will take to receive funds and what to expect from the application to the closing.
The process varies depending on the type of financial institution you choose to apply for a small business loan. The duration to process an application differs based on the bank’s experience with lending to the industry and the timeliness of the documents submitted. Usually, it takes about two to six months for the bank to review and approve a loan application.
According to Lantern by SoFi, “There are numerous loan options to support small businesses at every point in their journey. Some loans are geared toward supporting startups, while others help established companies continue to grow.”
Getting loan approval is usually conducted through a series of meetings with different individuals from the loan team. The three phases of the process are application, underwriting, and closing.
1. Application Process
The goal of the application process is to gather all the necessary information to determine if you need a loan. During this stage, the loan officer will talk about your goals and plan for the loan. Some of these include refinancing existing debt, acquiring an existing business, or expanding your current operations.
Before you start processing the loan application, you must have all the necessary information about your business, such as the purchase price and your plans for the future. This will allow the loan officer to gather all the necessary information to make an informed decision. You will need to provide information about your plans for the future. The loan officer will also need to know about the local market and the competition in the area.
2. Underwriting Process
During the underwriting process, the loan officer will work directly with the individual who has been assigned to review and verify the documents submitted by the business. They will then complete a cash flow analysis and other financial reports related to the company and the individual seeking the loan.
The loan officer may also require additional information about the company’s financial condition to review the application. This information gets included in the credit memo, which is sent to the credit officer, who will decide whether to approve the loan request.
Once your loan gets approved, you will receive a commitment letter that will include the terms and conditions of the deal. Your underwriter will also help you through the review process. They will provide you with all the necessary support and guidance to help you get the most out of the loan.
3. Loan Closing Phase
A loan closing specialist will then prepare a closing checklist to help you complete the necessary documents for the loan. They will contact you and arrange a follow-up call to discuss the checklist. All the involved parties get included in taking the final call.
After completing the checklist, your closer will then approve all the documents received and move the loan into the next phase of closing. This includes the security agreement, Deed of Trust, and the note. After reviewing the documents, your closing team will sign the final documents. You will work with various specialists who will help you get the most from your loan throughout the entire process. Understanding the various phases of the loan process will allow you to make informed decisions and navigate the loan’s multiple steps.