Choosing an SBA Lender

SBA Loans

Why knowing an SBA lender is a good thing for a small business owner? One of the most critical steps to starting your new company is to get financing. For most entrepreneurs, this means going to the bank to get a small business loan, but there can be a lot of roadblocks in your way, which can make the whole process take extra time without any guarantee of funding. Fortunately, a better way to get financing is to go through the Small Business Administration for a loan. The procedure can be a lot simpler and give you better results in a shorter period. All you have to do is find an SBA Lender.

What is an SBA Lender?

When you apply for a loan through the SBA, you’re not actually getting money from the administration. Instead, what you’re essentially doing is entering into a contract with them that ensures that you will pay back the loan no matter what. Getting this approval then makes it easier to get financing from a bank as the SBA Lender has the backing of the SBA, rather than just your credit history and your word.

What’s important to note here is that not every SBA lender operates in the same way. As such, it’s imperative that you follow some guidelines when choosing a lender to finance your business. Here are the most crucial considerations you should make.

SBA Preferred Lender Status

While going through the SBA can make your loan process much smoother, it’s not without its own set of obstacles. One of them is that most lenders still have to discuss details with the SBA to approve your loan, which can take time and require a lot of documentation.

SBA Preferred Lenders, though, have the highest rating from the Administration and can make the final decision on your loan. This means that you get a much more simplified process and can get financed much sooner. Also, preferred lenders have a long history of working with the government, meaning that you get some extra peace of mind as well.

Overall, it’s not necessary for you to secure a loan through a preferred SBA lender, but, given the benefits, you really should.

What an SBA Lender Requirements Are

Regardless of the bank you may choose, it’s imperative that you understand all of the terms and qualifications that have to be met to get the loan. It’s critical that you get all of it in writing beforehand and that you discuss with a loan officer about what criteria you currently meet and what you can do to satisfy those that you don’t. You never want to get into a contract without having both eyes open, so this should be your first question no matter what.

SBA Loan History

If you don’t go with a preferred SBA lender (for whatever reason), then you still want to make sure that you look at how many loans they’ve given in the past. Just like lenders will view your credit history to get a better idea of how good you’ll be with their money, you should be performing background checks on them to see what they are like. Lenders with a long history of SBA loans will be much easier to work with than those that don’t.

References and Reviews

Another bit of homework that you should do is to see what other people are saying about their SBA lender. This will help you avoid any potential consequences down the line if you spot a troubling trend. This will also give you an idea of what to expect regarding customer service and assistance should you ever have any other questions later on.

Lending History

This is slightly different than looking at how many loans an SBA lender has issued. Instead, what you’re looking at is the trend of what kind of businesses they lend to the most and whether or not you would fall into a similar category. All lenders want some amount of consistency and certainty when drafting loans, and as such, they may prefer businesses that have a better track record of success.

Overall, this can help you figure out what you need to do to convince your lender that you’re a safe bet. If you fall into a category that they lend to a lot, then you probably don’t have to go the extra mile with your request. Conversely, if you’re not, then you might have to provide additional evidence to suggest that your business will thrive.

Lending Limit

How much do you need for your company? What is your minimum amount required to succeed? If it’s more than what the lender can offer (or that you can qualify for), then you are going to be in a pickle. Once you’ve determined the likelihood of getting approval, it’s important that you have a solid grasp on your financial needs. This will not only help you get approval faster, but it will ensure that you don’t get into any problems down the road. There’s nothing worse than asking for too little and needing more later on.

In the end, if you really want to get financing for your company, then you want to learn about what it takes to get an SBA loan as well as find a preferred lender who can make the process as easy for you as possible. Don’t settle for the first bank that says “yes,” but instead shop around and find the right preferred SBA lenders group that fits you.