SBA 504 Loan Timing: Closing vs. Funding Explained

At GLCF, we understand how important it is to close and fund your SBA 504 loan efficiently. For borrowers, the loan’s attractive interest rate isn’t locked in until the loan actually funds. For third-party lenders, their interim financing isn’t paid off until the SBA bond proceeds are received. Because timing is critical for everyone involved, we want to make sure you clearly understand the closing and funding process so we can work together to keep things moving smoothly and avoid any delays.

Important Distinction: Closing vs. Funding

SBA 504 loans operate differently from traditional bank loans when it comes to funding. After your loan closes—meaning all documents are signed—it doesn’t get funded right away. Instead, your SBA loan is grouped with others from across the country and sold to investors in the form of bonds.

These bonds are backed by the federal government, which enables us to offer such low, fixed interest rates and long repayment terms. However, because the loan must go through this national bond sale process, it typically takes 30 to 60 days after closing for the SBA funds to be disbursed.

In the meantime, your third-party lender (typically a bank or credit union) provides interim financing to cover the SBA’s portion of the project. Once the bond sale is complete, the SBA proceeds are wired directly to the third-party lender to pay down their interim financing.

At that point, your permanent financing is in place, and you’ll have two separate loans:

• One with your third-party lender (typically for 50% of the project)

• One with the SBA (typically for 40% of the project, serviced by GLCF)

This structure is what makes the SBA 504 loan program unique, allowing businesses to secure long-term, fixed-rate financing with favorable terms.

Simultaneous vs. Non-Simultaneous Closings

While simultaneous closings are only an option for straight purchase or refinance transactions, these deals can still be structured as non-simultaneous closings when necessary. Construction projects, on the other hand, must follow a non-simultaneous process due to their longer timelines and funding structure. If you’ve discussed a simultaneous closing with your loan officer, the following timing guidelines are important to keep in mind.

Non-Simultaneous Closings
A non-simultaneous closing means the third-party lender closes first, and the SBA portion closes later, usually the following month. This staggered timing allows for a more predictable funding schedule since each closing and funding event is handled separately.

Timing for non-simultaneous closings:

• We must receive all closing documents by the 30th of the month to schedule the SBA closing for the following month.
  Example: Documents received by July 30 → SBA closes in August

Simultaneous Closings
If we are doing a simultaneous closing, both the SBA and third-party lender documents are signed on the same day, which helps streamline the process. However, it’s important to remember that simultaneous closing does not mean immediate funding. SBA 504 loans are funded through the sale of bonds on the open market, so funding typically occurs 30 to 60 days after closing. During this period, the third-party lender provides interim financing to cover the SBA portion until the bond proceeds are received and used to pay down the interim loan (please see above for more details on closing versus funding).

Timing for simultaneous closings:

• If we close on or before the 20th of the month, funding will typically occur in the next SBA funding cycle.
  Example: Close June 14 → Fund in August

• If we close between the 21st and 31st of the month, funding will typically occur in the second SBA funding cycle after closing.
  Example: Close June 21 → Fund in September

Several factors can extend the recording process for simultaneous closings:

• Transfer of property and warranty deed recordings take longer than a typical mortgage.

• Third-party lender (TPL) documents are recorded only after the deed is recorded.

• SBA documents are recorded after the TPL documents.

• Some counties take up to three business days to complete recordings.

• There is a risk of having to re-record if any document is rejected.

• Additionally, some borrowers may be waiting for temporary food or liquor licenses, which require the deed to be recorded first.

Funding Dates:

Please note that the final funding month is subject to approval by SBA’s closing attorney and can be influenced by many factors. The GLCF Closing team works diligently to close and fund projects as quickly as possible.

If you have questions regarding your loan funding. Please call your Closing Specialist. You can find their contact information below.

Laura Seromik
Vice President of Closing and Servicing
10 Years of SBA Lending Experience
T: (616) 323-1273
E: Laura@glcf.org

Abbey Byrne
Senior Closing Specialist
20 Years of SBA Lending Experience
T: (616) 323-1274
E: Abbey@glcf.org