When it comes to applying for a business loan, fast approval and ease are top of mind for many business owners. Small Business Administration (SBA) loans are geared towards helping small businesses get the loans they need to prosper. These loans are available to fund a variety of business needs, including real estate, equipment, inventory, accounts receivable, and acquiring other businesses.
After a thorough review process, the SBA designates special status to select banks called Preferred Lender. This means the bank takes the approval process in-house, among other operational steps, instead of delegating it to the SBA.
“The main question I get from small businesses is how soon can I get approved for the loan?” says Dell Duncan, VP, commercial lending at First Federal Lakewood. “With an SBA Preferred Lender status, banks have the ability to issue the loan approval when underwriting has been completed, making it an attractive quality when they look for banking partners.”
Smart Business spoke with Duncan about why businesses should consider working with an SBA Preferred Lender bank and what the benefits of SBA loans are.
What does SBA Preferred Lending status mean?
The SBA created the Preferred Lender Program to give banks the opportunity to streamline their lending procedures and process loan applications. Banks that have the Preferred Lender status proved to the SBA that they have a solid handle on loan structure, eligibility, closing, servicing loans and more.
A common misconception is that SBA loans can be time consuming. A bank with the Preferred Lender status generally has the ability to issue the approval quickly — without handing it off to the SBA for their review. Once the bank has all the business owner’s information, the approval process is as fast as that of a conventional loan, given that the bank has addressed any eligibility issues before submitting. An SBA Preferred Lender has demonstrated the ability to process, service and liquidate loans, including minimizing issues related to the loan.
Banks must display a thorough understanding of the SBA lending process to maintain status, which includes providing ongoing education for their lenders. From training classes to continuing education programs, lenders are responsible for furthering their knowledge on the SBA lending process. Working with these lenders gives you a peace of mind that you’re working directly with a bank that the SBA endorsed.
What are the benefits of SBA loans?
Between a faster approval process to longer repayment terms and lower down payments, there are many benefits of SBA loans and working with an SBA Preferred Lender. There are multiple SBA programs that are designed to fit your specific financing requirements. For example, if a startup or an existing business has little to no payment history, SBA loans may help with financing when they may not qualify for conventional loans.
For those that are looking to start or buy a business and don’t have a large down payment, they may find that an SBA loan offers a lower down payment. Plus, longer repayment terms may reduce monthly payments, helping retain more cash flow.
What should businesses look for in a banking partner?
Community banks with the SBA Preferred Lender status can offer a personalized, one-on-one experience. The right banking partner will help find the best loan for your lending needs and is committed to the success of your business. Do your due diligence to understand your options and make sure that your banking partner aligns with your business goals.
Additionally, an SBA Preferred Lender can help facilitate an SBA loan, including anticipating and resolving any issues that may arise along the way. It’s important to find a bank that is experienced in SBA lending and is committed to working with you to properly structure a loan. ●
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