Why does a bank take so long to get a loan ready?

This answer can vary by institution as well as by the type of loan.  Typically, smaller banks are a little more agile than larger banks, e.g., $10B in size versus $100B, due to more support functions being at the local level. As banks grow, they typically begin to consolidate and move certain functions, such as underwriting, to a more centralized location, to save money.  Thus, if you are applying for a loan at a Capital One or at Chase, your loan may take a while (two weeks to a month) to get to closing.  At a more local bank, you will most likely find a quicker turnaround.  With real estate loans, this process at any bank is lengthened due to the need to obtain third-party reports, e.g., appraisal, survey, environment (if applicable). 

So how does the entire process work? For the commercial process, you will typically work with a commercial banker, who will let you know what type of financial documents that you will need to provide to receive approval. If you do not have everything, your loan can hang up here because if you do not provide up-to-date financials, it is hard for a bank to provide approval.  After this, either your local banker or and underwriter (may be local or centralized in another city) will prepare a loan approval package that describes your company and its history, your company’s performance, the loan request, the collateral securing the request, strengths and weaknesses of the deal, and how the bank will be paid back.  Following memo completion, depending on the size of the bank, your loan will either be presented to a credit officer or a local loan committee for approval. At this stage, your loan might be approved as-is, declined, or approved with caveats or changes that will need to be communicated to you.  This initial process can last several days to a couple of weeks depending on loan volume.

After approval, your loan will be sent to closing.  At this stage, various regulatory checks and due diligence items will be completed, typically by an assistant or closing person.  Internal loan documents will also be generated at this stage.  Obviously, on real estate loans, this stage will take a little longer; however, on lines of credit or equipment loans, this stage can take a few days to a week or two, depending on your bank.  If you are a new customer to the bank, the process can also take a little longer as the bank will need to input all of your information into their systems as well as gain familiarity with your business. 

So, the entire process can take some time, which can be frustrating, but you can press your banker some as larger banks typically get moving a little faster if some pressure is placed on them.  However, the process is not instantaneous and does take some time to arrive at the closing table.