Tips and Tricks on How to Choose the Right SBA Lender

There are about 627,000 new businesses every year. Unfortunately, not everyone has the funding they need. In fact, only 51% of businesses last beyond five years.

Many businesses fail because they don’t have the proper funding.

If you plan on starting your own business, you might need to look for a Small Business Association (SBA) lender. Issues like low credit scores, poor loan documentation, and a lack of collateral could cause problems. You might get denied for different types of loans.

Working with an SBA lender can simplify the process. Banks are often more willing to consider the loan if it’s backed by the SBA.

It’s not always easy to get approved for SBA loans, though. If you’re not aware of the process, you could make a costly mistake. You need to consider who you work with, too.

Here are the steps you need to follow to choose the best SBA lender. With these tips, you can find the best SBA-preferred lender for your business.

Get started with these tips and tricks today.

1. Talk to Other Lenders

First, take the time to speak with other lenders you’ve worked with in the past. Consult professionals you have a pre-existing relationship with, including:

  • Banks
  • Other lenders
  • Credit unions

Speaking with someone you already trust can streamline the process. They could recommend an SBA lender you can rely on. Their professional assessment can help you avoid working with an unreliable lender.

Speaking with lenders you’ve worked with previously can reduce the amount of paperwork you need to submit, too. Even if these lenders don’t offer SBA loans, they can still help.

2. Research Potential Options

If someone you know can’t recommend an SBA lender, that’s okay. Start researching potential lending institutions on your own.

Thorough research can help you find the most viable lenders available.

Look for lenders that have a strong reputation for offering SBA-backed loans. You’ll likely find many lenders don’t offer SBA loans. Scratch those lenders off your list.

Looking at different lenders can help you choose the most appropriate one for your business.

An SBA Preferred Lender, for example, can process SBA loans faster than other options.

During this step, take the time to compare interest rates, too. Take a look at the terms and conditions for each funding program as well.

Researching these options can help you find a program with a low interest rate and less strict terms.

Check out the SBA website, too. They list grants and tools you can use to compare different lenders.

Which Type of Loan is Right For You?

Before you learn how to choose an SBA lender, take a moment to consider the type of loan you need.

The SBA 7(a) loan offers high limits. It’s ideal for almost any purchase.

In some cases, however, you might need a line of credit instead of a loan. If you have smaller needs, you might want to consider an SBA microloan instead. If your area experienced an economic loss, consider other options.

Knowing what type of SBA funding you need can help you choose a lender that suits those needs.

3. Make Sure You Meet the Requirements

Learning how to choose an SBA lender can seem stressful, especially if you’re denied the first time. You can simplify the process by preparing your loan application ahead of time. Otherwise, you might find your documents don’t meet all the requirements.

First, make sure to state how much money you need. List what you intend on using the money for, too. If you need the loan for working capital, specify that within the application.

Make sure everything is precise and short. Simplifying the application can help you gain faster loan approval.

Try to improve your FICO score ahead of time as well. SBA banks might approve your loan faster if you have a strong credit score.

Different lenders have different demands regarding SBA loans. Understanding their demands could help you streamline the process.

The SBA doesn’t give out loans directly. You’ll submit your application to an SBA lender, who will forward the documents to SBA for approval.

You can learn more about SBA loan eligibility criteria here.

4. Look for Experience

The best SBA lender will have the necessary experience to help you through the process.

Make sure the lender you choose has years of experience handling the type of loan you need. They’ll ensure you get funding as soon as possible.

Consider looking for someone with experience helping businesses in your industry, too. Their prior experience could help you in the future.

5. Look for Multiple Product Offerings

About 64% of small businesses are started with less than $10,000. As you research each lender, look for someone that offers:

  • SBA loans
  • Equipment financing
  • Lines of credit
  • Other financial products

If you don’t qualify for an SBA loan, you’ll have a backup plan.

Maybe you need capital now while you wait for SBA funding to come in. Choosing an SBA lender with additional offerings could help. You can work with them to develop a plan while you want for your SBA loan.

6. Gather Your Documents

Before you can get a loan backed by the SBA, you’ll need the right documentation. Gather your annual financial documents for the last few years. These documents will help assess the position of your investment.

They can also help determine if you have the ability to repay the loan you receive.

Make sure your documents are accurate and up-to-date. Consider checking the website for more information. Gathering the proper loan application documentation can help you avoid potential missteps.

7. Meet With a Few Options

As you narrow down your options, consider meeting with a few different lenders.

Make sure to present yourself in a professional manner. You might need to back up any information regarding your loan request.

Look for a lender that’s professional and knowledgeable, too. If they struggle to answer your questions, they’re likely not the right fit. Instead, choose someone you can trust to help you through this process.

Fund Your Business: 7 Tips for Choosing an SBA Lender

Funding your business doesn’t have to feel like a stressful process. Instead, use these seven tips for choosing an SBA lender. With these tips, you can increase the probability of getting your loan approved.

Then, you can set your business up for long-term growth and success.

Ready to obtain your SBA loan? We’re here to help.

Find a lender today to get started.