Generally, when people hear SBA financing they think “too much paperwork” and “it’s going to take forever.”
We’re here to tell you that PLP will help you with the few extra required documents and that the average turn time to obtain an SBA approval, which includes the underwriting process, is about 30 days. Now there are some things that can extend that turn time but our goal is to lay all of those out upfront giving you clear expectations. Without further ado, here are the top situations which could hold up your SBA approval:
- Obtaining a complete financial package – While you are working to obtain financing you are still running your business, which should be and is YOUR priority. However, this does mean that sometimes you might get distracted and delay getting us what we need to get the loan approved. Don’t sweat it – we will kindly “nag” you and help you along, throughout the process.
- Construction – To obtain an SBA approval, IF your project involves any kind of construction (including minor renovations), we will need a third party construction budget from your General Contractor. It is our experience that GC’s are extremely busy and getting that construction budget from them can take some time. Our recommendation, start those conversations as soon as possible. We can underwrite with your estimated budget but cannot get an SBA approval without that third party budget.
- Franchise/Dealer/Jobber Agreements – IF you are a franchise or have a dealer agreement, the Franchisor/Dealer must be on the SBA directory of approved Franchises/Dealers. We will always ask for this on our initial underwriting needs list. IF your Franchise/Dealer is on the approved list it is just a matter of us collecting fully executed documents. This will include an SBA addendum which your Franchisor/Dealer has already agreed to. IF your Franchise/Dealer is not on the SBA approved list, we must submit the Agreement to SBA for review, approval and to determine if the Franchisor/Dealer will sign the SBA addendum or will need to negotiate one. This process can take TIME. Average turn time is 45-60 days. So if this is a factor in your loan application, we’ll help you get the process underway right away.
- A bank issued LOI (Letter of Intent) or Commitment Letter – The bank partner that will finance 50% of your project will underwrite a permanent first lien loan as well as an interim bridge loan. The bank partners will carry for SBA portion until we fund our loan. In our experience, typical bank underwriting takes 2-4 weeks. PLP may get the underwrite completed faster, which means we’ll be waiting on the bank for a commitment letter before we can submit to SBA for that final approval. We endeavor to work closely with each bank partner and work through the underwrite together in an effort to speed things along for all parties involved. If your bank is willing to issue a Letter of Intent, we can substitute that for a full Commitment to Lend Letter to obtain the SBA approval.
- Environmental Issues at your Project Property – An environmental report is required to obtain an SBA approval. Your SBA approval is three fold – application (ability to repay proposed debt), Appraisal and Environmental. Hopefully your property doesn’t have any environmental concerns. However, IF it does we can most likely work through them. Typically, the bank, with our assistance, will determine the kind of environmental report required. It could be as simple as completion of an Environmental Questionnaire or it may be decided that a Phase I is the best place or required place to start. Environmental concerns are things like underground storage tanks (usually related to gas stations), contamination in the soil or groundwater, vapors from floor drains… We will work through any issue that arises and do our best to address anything that could come up on the front end so that your loan approval is not delayed.