After your SBA loan gets approved, the closing process is the final step to officially receive financing for your business. It involves detailed verification, paperwork, and signing of agreements that legally bind you to the loan terms.
Step 1: Receive the Commitment Letter
Your lender will provide a commitment letter, also known as a term sheet, outlining your loan terms such as amount, interest rate, repayment schedule, collateral requirements, and any conditions that must be met prior to closing. Review this carefully to ensure it aligns with prior discussions.
Step 2: Complete the Closing Checklist
You’ll receive a list of documents to provide, including business licenses, insurance proof, proof of down payment or equity, real estate appraisals, and organizational documents. Preparing these promptly helps avoid delays.
Step 3: Legal Document Preparation
While you gather documents, the lender drafts legal paperwork including the promissory note, security agreements, and SBA-mandated disclosures. These ensure your obligations and rights are clearly defined.
Step 4: Closing and Funding
Closing typically happens at the lender’s office or virtually, where you sign loan documents. Afterward, funds are disbursed to your business account, officially completing the loan process.
Timeline and Tips
The closing timeline varies but generally spans 4 to 8 weeks depending on document readiness and loan complexity. Staying organized, responding quickly to lender requests, and avoiding major financial changes pre-closing can streamline the process.
FAQ Highlights
- Difference between approval and closing: Approval means the lender agrees to fund; closing finalizes paperwork and releases funds.
- Can loans be denied at closing? Rare but possible if requirements aren’t met or financial conditions change.
- Typical SBA closing costs: May include attorney fees, appraisal fees, title insurance, and SBA guarantee fees. Some costs can be financed within the loan.
For detailed SBA loan types and lending procedures, see our SBA Loan glossary and learn about loan funding conditions. For authoritative guidelines, visit the SBA’s official site.
Successfully navigating the SBA loan closing process is vital to accessing the capital your small business needs to grow.