SBA Loan Specialist
The Small Business Administration (SBA) provides lending programs that can be complicated to understand. As a result, misunderstandings occur which may discourage business borrowers. Most of these misunderstandings occur as a result of inexperience and non-SBA Loan Specialists. Without expertise and knowledge of the complexities of SBA lending, borrowers may be misled and find the borrowing process unnecessarily complicated, discouraging frustrating.
On the other hand, working with an SBA Loan Specialist provides many benefits for small business borrowers. The SBA Loan Specialist knows the process, procedures and will often work with a variety of SBA lenders to find just the right match for a particular borrower’s needs.
SBA Lending Myths
We often hear myths from prospective borrowers regarding SBA lending. The 5 most common myths will be addressed to help you separate fact from fiction.
Myth #1: SBA Loans Are Easy To Get
SBA loans are used to finance small businesses that vary from the Ma & Pa general corner store to sophisticated, advanced technology businesses. Regardless of the type of business, SBA underwriting does not change and is consistent from loan to loan. For each loan, the SBA has specific eligibility requirements that apply to all loans and lenders.
Beyond the essential SBA eligibility requirements, lenders apply their standards to a business’ condition, collateral and cash flow. SBA Loan Specialists who knows your industry have the requisite knowledge to understand these business components as they relate to evaluate the financial portrait of the business and to determine the best SBA loan and lender to meet the borrower’s needs.
Because each SBA lending situation is specific and requires careful analysis and attention to detail, getting the loan is no cake walk. On the contrary, it requires specialized knowledge and connections to optimize the borrower’s chances of loan approval.
Myth #2: SBA Loans Are Hard To Get
SBA loans are, by design, here to help small business owners and aspiring business owners. SBA loans are not hard to get but do require the borrower to prove the necessity for the loan. With the support and guidance of an SBA Loan Specialist, chances of securing SBA loan approval increases substantially.
Compared to conventional bank loans, SBA loans are usually more flexible with the requirements for equity and collateral. SBA loans also have longer repayment terms and do not have balloon payments attached. Additionally, SBA interest rates tend to be more favorable than a conventional bank lenders.
Myth #3: The SBA Lending Process Takes Forever.
While it’s true that SBA lending requires numerous documents, it’s no more cumbersome than other types of loans. SBA lending requirements involve examining both the business and the borrower which does increase the number of documents that lenders request. While this may be an onerous task for some, SBA Loan Specialists are able to help by guiding clients with their processes and procedures to help assure a thorough loan application in order to minimize numerous subsequent requests.
Additionally, when possible, borrowers who apply to SBA’s Preferred Lender Program (PLP) will be further able to expedite their loan application. PLP lenders know how to determine SBA eligibility which permits the lender to approve the SBA loan directly without awaiting the SBA’s approval.
Myth #4: The SBA Is A Direct Lender
The SBA is not a direct lender. Instead, the SBA acts more like an insurance company. With SBA loans, lenders makes the loan, with the debt partially guaranteed by the SBA. This permits banks to issue credit for a borrower who might otherwise have difficulty obtaining a business loan with favorable terms. SBA guarantees allow lenders to extend their credit reach by minimizing their risk.
Myth #5: SBA Loans Require Too Much Collateral.
Though the SBA program guidelines require lenders to take available collateral, such as real estate liens, the SBA also states that borrowers without collateral should not be turned down just due to a lack of collateral.
For borrowers with no real estate to pledge, the reliance is on the strength of the business for debt service or loan repayment. The stronger the cash flow, the more likely loan approval even without outside collateral.
Hopefully we cleared up some misunderstandings about SBA loans. Working with an SBA Loan Specialist will also further eliminate any additional myths and will go a long way in facilitating the lending process. If you would like to learn more about SBA loans or speak to one of our SBA Loan Specialists, contact our office today.