What Happens During the Loan Application Process?

Small business owners often ask us about the loan application process. What is required to apply for financing and successfully complete the process? How long will it take to receive funds? Whether you need financing today or are hoping to gain a better understanding of the loan process to plan for future needs, it is important to know what to expect from application to closing.

Depending on the financial institution you choose, the process and the time it takes to receive funding may vary. Generally, once the loan application and all related documents are submitted to the bank, the rest of the process can take anywhere from two weeks to six months. The timing may vary based on the bank’s experience with lending to the borrower’s industry, the borrower’s responsiveness in submitting the necessary documents and the accuracy and completeness of information collected. At Live Oak Bank, our lending team specializes in various industries and understands the intricacies of those business models, which can make the process smoother. 

During each phase of the loan process, a borrower will work with different members of the loan team. The three stages of every loan are the application, underwriting and closing. 

Application

In the application phase, a loan officer will work with you directly to gather all information needed to prequalify your loan request. First, you will discuss your plan for the loan proceeds. Are you looking to refinance existing debt? Are you looking to acquire an existing business or expand your current operations? If you are buying or expanding, have the purchase price details available. The lender will need to understand your business and your plans for the future to submit a complete loan application. During the application phase, be prepared to present the following information to your lender:

• Describe your new and/or existing business and the local market. It will be important to understand the competition in the area, as well as the local demographics. The lender will also need to know about your experience in the subject business and the industry. 
• Discuss present revenue breakdown and anticipate future revenue and trends. This information will help the lender better understand your business.

The application includes items such as corporate tax returns and current financial statements as well as your contact information, resume and personal tax returns. 

Once all the necessary documentation is submitted, Live Oak Bank will send you a loan proposal or term sheet with the terms of the loan. After the proposal is accepted, your loan officer will introduce you to an underwriter via email and you will move into the underwriting stage.

Key things to remember:

• Be prepared to discuss how the “5 C’s of Credit” align with your business goals. The 5 C’s of Credit are your company’s: character, capital, cash flow, collateral, current economic and business and industry conditions.
  
• Final approval will come after the underwriting stage, while the pre-qualification provides a high-level picture of your loan options.
  

Underwriting process

In the underwriting phase, you will work directly with the underwriter assigned to your loan where they will do a deep dive into your financial information. This process takes approximately 7-10 days here at Live Oak. The underwriter verifies and analyzes documents submitted during the application phase to determine accuracy and creditworthiness. The underwriter will complete a cash flow analysis and full review and analysis of other pertinent financial information related to both the business and the individual(s) seeking the loan. There may be some back and forth between you and your underwriter depending on the details of your deal. Additional financial details may need to be submitted to the underwriter analyzing the business. This information will be part of the credit memo, which is presented to the credit officer who ultimately approves or rejects the loan request. Specific questions regarding paperwork can be addressed directly to your underwriter. 

When your underwriter finishes their analysis, they will write a narrative that tells your story and explains the facts of the deal. By understanding your story, how you got where you are today and your plans for the future, your underwriter will be your advocate and assist you throughout the review process. When your loan is approved, you will receive a commitment letter with the terms and conditions of the loan. Once you provide your signature, you will move into the final stage of the loan process. Remember – while SBA financing can be complex, we’re here to serve as your guide from start to finish! 

Loan closing

Once a commitment is made by the institution providing financing, the loan closing specialist, or closer, will prepare a closing checklist of all required documentation needed on your loan prior to closing. He or she will contact you to schedule a kick-off call to explain the checklist in detail. All parties involved in the loan, including the borrower, the borrower’s legal consultants and the lender, will be included on the call. Your closer will then review and approve all documents received off the checklist and move the loan into the last phase of closing. At this point, final loan documentation, including the Note, Deed of Trust, Security Agreement, is prepared and reviewed by your closing team prior to you signing to ensure all necessary information is included.

To successfully close your loan, we coordinate efforts with all involved parties to ensure that the process aligns with your commitment letter, Live Oak Bank's credit requirements, and the SBA's established procedures. Our closers assist in streamlining the SBA loan closing process by helping you gather the necessary documentation required for funding. You can help your closing team better assist you by connecting them with your critical partners early on in the process, and communicate openly and often about questions or concerns that you have. The timeline for this process varies based on the scope of the project and motivation of the parties involved. 

Servicing

Live Oak’s Business Analyst Group is the servicing function after the loan closes and fully funds. Once your loan is funded, a dedicated Business Analyst is your point of contact for the life of the loan. You can think of them as your direct line of communication with the bank.

Here are a few of the ways your business analyst works for you: 

• Financial analysis for your business 

• In-person visits 

• Assistance  with loan questions and modifications 

• Insight on industry trends and benchmarks 

• Recommendations to grow your business 

• Helping you uncover potential ideas
  

Throughout the financing process, you will work with a group of specialists who bring your small business loan to fruition. Understanding the phases of the loan and the roles of the lending team members will help you gather the appropriate information and navigate the loan process. With Live Oak, you get a partner who believes in your success, and is willing to take the journey alongside you.