When it comes to securing funding for your business, finding the right lender is of paramount importance. This is especially true when considering Small Business Administration (SBA) loans, which can offer attractive terms and benefits to entrepreneurs. In this article, we will delve into the process of finding the right SBA lender for your business. By understanding your financing needs, researching potential lenders, assessing loan programs, reviewing eligibility criteria, evaluating loan processing and turnaround time, comparing interest rates and fees, seeking recommendations, and making a final decision, you can ensure that you partner with a lender that aligns with your business goals and can provide the necessary funding for your success.
Understanding Your Business Financing Needs
Before embarking on the search for an SBA lender, it is essential to assess your specific financing requirements. Consider factors such as the purpose of the SBA loan, whether it is for business acquisition, expansion, working capital, equipment purchase, or other needs. Determine the loan amount and terms needed to support your business goals and financial projections. By having a clear understanding of your financing needs, you can narrow down potential lenders who can cater to those requirements.
Researching SBA Lenders
Exploring different SBA lenders and institutions is a crucial step in finding the right fit for your business. Start by compiling a list of reputable lenders in your area or those who operate nationwide. Review their qualifications, expertise, and experience in providing SBA loans. Look for lenders with a track record of successfully closing SBA loans and a solid understanding of the unique requirements and intricacies of the SBA loan process. While researching, make sure to ask the right questions to gain insights into the lender’s capabilities and suitability for your needs. Inquire about their loan volume, industry focus, area of operation, credit score requirements, recent SBA loans closed, average loan processing time, and their ability to pair SBA loans with other types of financing. We have a list of a dozen specific questions to ask prospective SBA financing partners at the end of the article.
Why a top SBA lender is a preferred choice
Choosing a top 25 SBA lender for an SBA loan is often the best fit for almost all borrowers due to several key advantages they bring to the table. Firstly, these lenders have extensive experience and knowledge in navigating the complex labyrinth of rules and regulations surrounding SBA loans. The SBA loan process can be intricate and involve numerous requirements, documentation, and guidelines. Top 25 lenders have a proven track record of successfully handling SBA loans, ensuring that borrowers are guided through the process smoothly and efficiently.
All top SBA lenders are SBA Preferred Lenders which participate in the SBA Preferred Lender Program (PLP), which offers several distinct advantages. Preferred SBA Lenders have been granted a higher level of authority and autonomy by the SBA. This means they can process and approve SBA loan applications more quickly, expediting the funding process for borrowers. The streamlined decision-making authority of Preferred Lenders can significantly reduce the time it takes for a borrower to receive the funds they need to fuel their business growth.
Secondly, SBA Preferred Lenders have a proven track record of successfully originating and servicing SBA loans. They have a deep understanding of the SBA’s loan programs, guidelines, and eligibility criteria. This expertise enables them to provide valuable guidance and support to borrowers throughout the loan application process. Preferred Lenders have demonstrated their commitment to adhering to SBA policies and regulations, ensuring that borrowers receive accurate and reliable information.
Lastly, Preferred Lenders often have dedicated SBA loan departments or teams staffed with experienced professionals who specialize in SBA lending. These professionals possess the knowledge and skills required to navigate the intricacies of the SBA loan process. They can provide personalized assistance, helping borrowers navigate the necessary documentation, underwriting requirements, and compliance measures.
Assessing SBA Loan Programs Offered
Understanding the different SBA loan programs available is crucial in finding a lender that aligns with your business needs. The SBA offers various loan programs, including the 7a loan program, CDC/504 loan program, microloan program, and disaster assistance loans. Each program has its own unique features, loan amounts, rates, and terms. Identify which loan programs are suitable for your business based on your specific requirements and eligibility. Consider the loan amounts, interest rates, repayment terms, and any additional benefits associated with each program. This assessment will help you focus on lenders who offer specific SBA loan programs that match your business needs.
Reviewing Eligibility Criteria and Requirements
Each SBA lender may have specific eligibility criteria and requirements for borrowers. Understanding these criteria is essential in identifying lenders who are likely to approve your loan application. Review the lender’s eligibility criteria, such as minimum credit score requirements, time in business, revenue requirements, and industry restrictions. Assess how well your business aligns with these criteria to determine which lenders are more likely to consider your loan application.
Evaluating Loan Processing and Turnaround Time
The speed and efficiency of loan processing can significantly impact your business plans. Inquire about the lender’s loan processing timeframes to ensure they align with your funding needs. Understand the documentation and paperwork required for the loan application process and determine if you have the necessary resources readily available. Additionally, assess the lender’s ability to provide a quick loan decision, as this can streamline your business operations and help you seize growth opportunities.
Comparing Interest Rates and Fees
The financial aspect of borrowing should not be overlooked. Review the interest rates offered by different lenders and compare them to ensure you are getting a competitive rate. Consider any additional fees associated with the SBA loan, such as origination fees, servicing fees, or prepayment penalties. Assess the overall costs of borrowing from each lender to make an informed decision based on the financial implications for your business. In our five-plus year of experience facilitating introductions between borrowers and top SBA lenders, we have noticed that rates and fees between banks are typically very close. The biggest cost driver is obviously SBA interest rates, and those rates are driven by Federal Reserve policy.
Seeking Recommendations and References
Seeking recommendations and references from trusted sources can provide valuable insights into the lender’s reputation and customer satisfaction. Reach out to other business owners who have obtained SBA loans and inquire about their experiences with specific lenders. Ask for recommendations from professionals in your industry, such as accountants or business advisors, who may have insights into lenders that specialize in your field. Additionally, explore online reviews and testimonials to gather feedback from other borrowers who have worked with the lender you are considering.
Making the Final Decision
After conducting thorough research and assessment, it is time to make the final decision. Evaluate all the factors discussed in the previous sections, including the lender’s qualifications, loan programs offered, eligibility criteria, loan processing time, interest rates, fees, and recommendations. Consider the lender’s expertise in SBA lending, their understanding of your business needs, and the level of customer service and support they provide. Narrow down your options to the most suitable SBA lender that aligns with your financing needs and initiate the loan application process with confidence.
Conclusion
Finding the right SBA lender for your business requires careful consideration and research. By understanding your financing needs, conducting thorough due diligence on potential lenders, assessing loan programs, reviewing eligibility criteria, evaluating loan processing time, comparing interest rates and fees, seeking recommendations, and making an informed decision, you can secure the funding necessary to support your business growth and success. Remember that partnering with the right SBA lender can provide more than just capital – it can offer valuable expertise, guidance, and support throughout your entrepreneurial journey.
Checklist of specific questions to ask potential SBA lenders
Here is a list of 12 questions that a borrower should ask when selecting the best SBA lender for your business:
- How many SBA loans does your bank do per year?
- Does your bank have experience lending in my specific industry?
- Do you lend in our geographical area?
- What are the minimum credit score requirements for your bank?
- Can you provide examples of recent SBA loans closed, particularly in businesses similar to mine?
- How long does your bank typically take to close an SBA loan?
- Are you able to pair an SBA loan with other types of financing, such as a conventional loan or USDA loan?
- What loan programs do you offer apart from SBA loans?
- What is the maximum loan amount and terms your bank provides for SBA loans?
- Do you have any specific expertise in handling SBA loan applications and underwriting?
- How accessible and responsive is your team during the loan process?
- What sets your bank apart from other lenders, and why should I choose your bank for my SBA loan?
Remember, these questions serve as a starting point to gather information and make an informed decision. Feel free to ask additional questions that are specific to your business needs and circumstances.
Note that users of our Lender Match tool have many of these questions already answered when they speak to the banks we introduce, as we only make introductions to SBA lenders which meet your important deal criteria (such as industry, geography, and minimum credit score).
Top SBA Lenders (all are preferred SBA lenders)
| Rank | SBA Lender | Total Loan $$$ | # of Loans | Avg Loan | Avg Rate |
|---|---|---|---|---|---|
| 1 | Live Oak | $2,291,016,699 | 1,517 | $1,510,229 | 5.3% |
| 2 | Newtek Small Business Finance | $945,317,357 | 1,353 | $698,682 | 6.1% |
| 3 | The Huntington National Bank | $914,412,500 | 4,534 | $201,679 | 5.5% |
| 4 | Celtic Bank | $701,707,100 | 494 | $1,420,460 | 5.8% |
| 5 | Byline Bank | $623,952,600 | 491 | $1,270,779 | 5.9% |
| 6 | Readycap Lending, LLC | $578,732,700 | 489 | $1,183,502 | 5.4% |
| 7 | Wells Fargo | $565,409,200 | 1,928 | $293,262 | 7.4% |
| 8 | Harvest Small Business Finance | $450,384,800 | 382 | $1,179,018 | 5.6% |
| 9 | Enterprise Bank & Trust | $442,756,800 | 394 | $1,123,748 | 5.1% |
| 10 | U.S. Bank | $438,827,900 | 1,682 | $260,896 | 5.9% |
| 11 | KeyBank | $425,479,320 | 920 | $462,478 | 5.7% |
| 12 | MUFG Union Bank | $396,324,100 | 243 | $1,630,963 | 4.0% |
| 13 | Commonwealth Business Bank | $381,635,000 | 240 | $1,590,146 | 4.7% |
| 14 | TD Bank | $359,487,569 | 1,548 | $232,227 | 7.3% |
| 15 | Metro City Bank | $307,953,300 | 154 | $1,999,697 | 4.4% |
| 16 | Wallis Bank | $305,202,300 | 168 | $1,816,680 | 5.0% |
| 17 | United Midwest Savings Bank | $304,385,700 | 1,060 | $287,156 | 6.0% |
| 18 | Pinnacle Bank | $298,615,020 | 235 | $1,270,702 | 5.0% |
| 19 | PNC Bank | $296,910,000 | 629 | $472,035 | 6.7% |
| 20 | Bank of Hope | $294,203,000 | 288 | $1,021,538 | 4.9% |
| 21 | Bank of the West | $285,548,600 | 297 | $961,443 | 4.6% |
| 22 | Berkshire Bank | $284,237,400 | 276 | $1,029,846 | 5.7% |
| 23 | Bank of George | $273,089,900 | 118 | $2,314,321 | 5.2% |
| 24 | Peoples Bank | $263,703,150 | 266 | $991,365 | 5.4% |
| 25 | Open Bank | $262,704,800 | 139 | $1,889,963 | 4.7% |