After a successful full underwriting, the SBA 7(a) loan process comes to its first legally binding document – the loan approval/loan commitment letter (different names, but the same thing). This document, which lays out the loan and its terms, signifies the lender’s formal conditional acceptance of the loan application. Once signed, the letter binds both parties to the given terms. However, it also includes conditions that must be met before the loan is funded.
Contents of the Letter
The loan approval/commitment letter is the culmination of the loan process up to this point. Here is an overview of its contents:
• Final Loan Terms
The letter lays out the final terms of the loan, including its interest rate, down payment, total value, term, repayment schedule, and any other details.
• Conditions for Loan Closing
The letter includes a list of conditions that the borrower must meet before the loan can close and be disbursed.
• Required Deposits/Fees
The letter includes a list of the deposits and fees that must be paid by the borrower. For more details on these deposits and fees, see Step 10: Deposits.
Common Conditions
The conditions in the loan approval/commitment letter will differ from loan to loan. However, here are some conditions that are usually included:
• Completed Closing Process
Although the letter is a formal approval of the loan application, it’s not the end of the loan process. The loan closing process must still be completed, including new requested documents, the completion of SBA forms, and more.
• Payment of Required Deposits/Fees
The borrower is usually responsible for paying part of the loan’s administrative costs through specific deposits/fees before the loan can close.
• Expected Results from Third Party Documents
The lender usually requires third party documents for loans, including property appraisals, environmental assessments, and business valuations. The loan’s completion under the letter’s stated terms depends on the results of these third party evaluations.
