What MSP Owners Should Expect During the SBA Loan Process
▶️ Watch: Demystifying the SBA Loan Process for MSPs
Prefer to read? The key ideas from the video are expanded below.
The SBA loan process can be very different from a conventional loan. If you go into it unprepared, it can be long, messy, and frustrating.
I know because I’ve been through it myself.
In my case, I worked with one of the top SBA-producing banks in the country. It was a national, online lender, and I expected the process to be smooth. It wasn’t.
At one point, there was a full month-long delay because the bank simply forgot to order the valuation. I checked in multiple times and was told it was underway, but no one had actually clicked the button to order it.
From the first conversation to funding, the process took six months. And that’s me — I’m a CPA, super organized, and very responsive.
Expect the SBA Loan Process to Take Time
SBA loans usually take more time and involve more steps than a conventional loan.
One factor is how the lender processes SBA loans. Some lenders have delegated authority from the SBA to make certain credit decisions without prior SBA review. Other loans are processed on a non-delegated basis through the SBA’s Loan Guaranty Processing Center.
That difference can affect how many steps are involved, but it does not make the rest of the lender’s process disappear. The bank still has to collect documents, underwrite the deal, complete valuations or other required work, and get everything ready for closing.
I’ve seen very small SBA loans move quickly. A larger loan can also move relatively quickly when everything lines up. But I would not plan around a best-case timeline.
The longer the process drags, the more chances there are for something else to change. You can roll into a new tax year and suddenly need updated returns, fresh financial statements, or another round of information.
Know What You Are Personally Signing Up For
Another thing borrowers need to understand is the personal guarantee.
For SBA 7(a) loans, individuals who own 20% or more of the applicant generally must provide an unlimited personal guaranty.
In my own deal, the bank also took a second position on my home. That does not mean every SBA loan will be structured the same way, but it is a good example of why you need to understand exactly what you are guaranteeing and what collateral the lender is requiring.
If things go badly, you can be personally on the hook. That does not automatically make the financing a bad deal. It just means you should go in with your eyes wide open.
Treat Every Document Request as a Priority
SBA loans are a lot of work. If you run an MSP, you need to know that going in.
The bank may ask for round after round of documents, and sometimes it will feel like you are sending the same thing more than once.
My strong advice is to be extremely responsive. Treat those requests as a priority even when they feel repetitive.
You cannot control every delay in the process. You can control whether the bank is waiting on you.
I also would not wait until the lender asks for something to start tracking it down. Gather your key documents in advance so you are not waiting three weeks on your CPA to send you a copy of something that could have been sitting in your folder on day one.
Get Organized Before the Bank Starts Asking
I create a folder for clients going through this process, and sometimes it ends up with 100 documents before we’re done.
Every lender and every transaction can ask for something a little different, but borrowers should expect to gather items such as:
Several years of business and personal tax returns, including information for related entities when applicable.
Current business financial statements.
Personal financial statements.
Ownership and partner information, depending on the ownership structure.
The better prepared you are, the less time you lose chasing documents while the loan is already in motion.
For an MSP owner who is still dealing with clients, employees, and escalations every day, it can help to set aside a short window to handle loan requests so the financing process does not get ignored and the rest of the business does not get completely derailed.
Remove the Delays You Can Control
The bottom line is that SBA loans can take longer, involve more paperwork, and generate more questions than you expect.
You may still run into delays you cannot control. I certainly did.
But if you go in prepared, stay organized, and respond quickly, you can at least make sure you are not the reason the process stalls.
This article is for educational purposes only and is not tax or legal advice. Every business is different, and you should talk with your own professional about what makes sense for your situation.
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