SBA Express Loan Program: Disadvantages

With many lenders touting the SBA Express Loan to small businesses, it is important to weigh all the pros and cons before making the leap. The wrong type of loan does not help in the long run.

The SBA express loan is beneficial to many with its longer repayment terms, willingness to work with start-up businesses, and requiring less collateral than a traditional loan. However it is not without some disadvantages.

Disadvantages of the SBA Express Loan Program:


  • It is possible that a small business will have to pay slightly higher interest rates during repayment. The SBA does have a maximum interest rate chargeable by a lender to a small business, but it should be clear that not all lenders charge the same interest. Some even charge more for loans backed by the SBA.
  • A business applying for an SBA backed loan will have to go through additional requirements as declared by the SBA. This includes certain volumes and types of businesses or services, as well as what the funds can be used for. These requirements may be different and more detailed than what the bank requires for a traditional loan.
  • While the SBA express loan is meant to take a much shorter time frame, depending on the information submitted, it can still get hung up in approval.
  • The express loan does require good credit, and that requirement will vary depending on the lender.

With the disadvantages, the advantages of the SBA express loan tend to offset them. The documentation and application process is much more streamlined, as the lender will use their own forms and review them in-house. The bank uses its own discretion in lending, which is why the process takes less time to approve.

Depending on the lender, the amount of information submitted can vary as well, with some lenders not requiring as detailed business plans and financial statements as others. This loan can also be secured with little or no collateral. With their being a lack of overall continuity between vendors, the approval process may prove to be somewhat frustrating if the borrower is turned down by one, only to be approved by another with the same requirements. This results in lost time and productivity.

Overall, the SBA Express Loan program has provided funds to rapidly growing businesses in times of need, and been successful in doing so. SBA-backed loans are more secure in some lenders eyes since the bank will not be responsible if it goes into default. The borrower should be detailed in all information submitted to ensure the best loan option possible.