Commercial Lending

How to Remove the Friction Points in Your SBA Loan Approval Process

SBA loan approval process friction points can come in many forms, such as inefficiency, a lack of clarity or poor communication. Learn how to remove them.


SBA loans are a type of small business loan partially guaranteed by the federal government – the Small Business Administration – that mitigate the financial risk of commercial lenders to encourage broader lending to small businesses in need of assistance. The SBA is not a lender. Rather the SBA partially backs small business loan applications within a network of approved lenders.

For loans of $150,000 or less, the SBA will guarantee a maximum of 85%. In loans exceeding $150,000, the maximum percentage drops to 75%, with a maximum total exposure cap of $3.75 million. SBA loans exist to make commercial lending available to businesses that most banks would otherwise consider too risky. To protect against excessive outlays, the SBA application process is more thorough and time-consuming than other kinds of commercial loan applications. 

3 Causes of SBA Approval Lag

The SBA loan approval process takes an average of 60 to 90 days. If you audit your own historical data and find your approval times lagging behind the national average, you’ll want to look under the hood of your day-to-day operations to identify friction points. Here’s a list of three common causes of SBA approval lag.

1. Unclear Processes

The SBA loan origination system differs from other commercial loan types in the extent of information it requires about the applicant. As it can take applicants a significant amount of time to gather all the necessary information and collect all required documents, lenders should emphasize communicating these requirements clearly and upfront to avoid any oversights. Not only can this reduce the amount of time needed for this process, but it can also drastically reduce friction for your customers.

Required SBA applicant information consists of:

  • Citizenship status
  • Criminal history
  • Business type and plan
  • Personal history
  • Personal and business financial statements
  • Business ownership and licensing documentation
  • Loan application history
  • Income tax returns
  • Personal resume

2. Poor Document Management Systems

Poorly designed document management systems commonly introduce bottlenecks into the document collection phase of loan applications. If applicants submit documentation piecemeal in varying paper and electronic formats, loan officers will struggle to reconstruct it all in the absence of a clearly defined commercial loan workflow process chart or integrated document management system. Without proper controls, lenders can expect that:

  • Applicants will submit inaccurate or incomplete information
  • Submissions will include outdated versions of documents
  • Files will be lost or misplaced

As these document errors unnecessarily delay approvals and often contribute to compliance errors, lending institutions should prioritize adopting a comprehensive document management system.

3. Poor Communication Between Business and Lender

After the SBA draws up loan agreement documents, most SBA loans pass through a closing period of 7 to 14 days. If any issues arise during this time, the SBA will pause approval and funding until their concerns are addressed. Lending institutions should stress to their loan officers that timely communication during this time is critical to avoiding unnecessary delays. 

The Importance of a Positive Customer Experience

If your organization is part of the SBA’s Preferred Lender Program (PLP) but is still underperforming on SBA targets against industry norms, you may want to evaluate the quality of the customer service experience your teams provide. Following approval rates and turnaround times, the quality of customer service (and overall customer experience) now ranks third in importance to loan applicants when choosing a lender.

Here are action points your organization should take to ensure you provide a positive experience on all fronts.

1. Audit Your Touchpoints and Channels to Identify Friction Points 

In the wake of rapid digital transformation during the recent shift to remote work, consumers want more control over how they communicate with businesses. Most expect real-time self-service options through mobile apps and social media as well as email and websites. Banks and other lenders are not immune to the pressures of evolving customer preferences and should evaluate how their outgoing communications track against their customers’ preferred channels of engagement.

2. Leverage Automation to Streamline Processes for Loan Originators and Applicants

Many document automation technologies that can streamline loan processing and reduce time spent on rote tasks are now available to lending institutions. Lenders can digitize paper applications – or automate the digitization of paper submissions with intelligent document processing (IDP) – and add AI workflow controls to reduce errors and omissions. 

Additionally, loan officers can use software to digitize their application checklists and automate email and text reminders for missing documentation, reducing their time spent on redundant calls and emails. Conversely, lenders can configure automation software to issue notifications to officers when applicants submit documents to eliminate downtime on their own end.  

Reduce SBA Loan Processing Times with FileInvite

FileInvite’s automated document platform offers commercial lenders an unrivaled suite of smart features to automate and streamline loan processing tasks. FileInvite allows clients to submit all documentation and signatures digitally from any device via a single client portal with bank-grade SOC 2 security. Loan officers can find all submitted applicant documents in a single administrative dashboard through which they can issue requests, reviews, and approvals.

Read this case study to learn how FileInvite allowed a top 10 SBA lender to process 12 month of loans in just 2 months.

Sign up for a trial - FileInvite - Document collection that closes 34% more loans

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