The Small Business Administration (SBA) is a federal guarantee program designed to incentivize banks to make loans to small businesses that are considered high risk.
The SBA is not a direct lender. That means the SBA mitigates risk for participating banks by guaranteeing up to 75% of the outstanding principal loan balance. In case of default, the participating bank’s loss is the difference between the guaranteed portion and the outstanding principal balance.
For this reason, most banks have an SBA department to serve the small businesses in their communities.
Not All SBA Lenders Are Created Equal
However, it’s important to note that not all bank SBA departments are created equal. For instance, some banks have stricter underwriting guidelines than the SBA guidelines themselves, meaning that even though the loan request may qualify for SBA financing per SBA guidelines, it will still be declined. That can be frustrating!
On the other hand, there are banks that generally approve and fund loans based on SBA eligibility and qualification standards and not their own.
As you can see it’s important to know which banks have stricter SBA guidelines and which banks follow the SBA’s lead before starting the loan application process.
Working With A Broker Is More Efficient
Many business owners and entrepreneurs like researching banks and lenders on their own. If that’s you, stop!
There are hundreds of banks that offer SBA loans, tracking down the right person and having a meaningful conversation with them is time consuming, frustrating and inefficient.
Even if you were able to reach the right person at each bank, can you really trust that person to give you the best information for your unique circumstance when their livelihood is directly tied to their employer – the bank? You’d hope so, and yes there are some good ones out there, but honestly, it’s rare.
Moreover, it takes years to become an expert in the nuances of SBA financing not to mention that program guidelines are constantly being updated and amended.
Will It Cost More To Work With A Broker?
No! Choosing to work with an honest and knowledgeable SBA loan broker will save time, money and energy. The broker accomplishes this by quickly determining whether the loan request meets SBA’s eligibility and qualification requirements, only sending the loan package to banks that meet the borrowers unique borrowing needs and by being available to answer questions throughout the entire loan application process.
ThinkSBA Is Ready To Help!
Ryan Smith, Founder and Principal of ThinkSBA, has been serving business owners and entrepreneurs in their quest to obtain the capital they need to start or grow their business through SBA financing for over a decade.
If you are ready to start your SBA journey call us today at (858) 762-2774 or complete our online form.