A few things to consider when selecting which SBA lender is best for you
By: Connie Castaldo, Executive Vice President – Business Development Officer at Gulf Coast Small Business Lending
I’ve been actively involved in SBA lending for over 25 years and have provided SBA loans to thousands of borrowers nationwide. During this time, I’d like to think I’ve seen at least one of just about everything. Borrowers sometimes comment that they initially thought all SBA lenders are basically the same and so it wouldn’t matter which one they decided to work with on their project. All too often they quickly (and sometimes not so quickly) learn that all SBA lenders are not created equal. In this article I will provide some pointers to help you assess which SBA lender is the right one for you and your unique project.
If you are preparing to pursue your dreams and will need financing to assist with your project, an SBA loan is likely a very good option for you. When you really think about it, this just might be one of the biggest and most important financial decisions you will ever make. It only makes sense that you should carefully consider which SBA lender is best for you and your unique project.
As I mentioned above, SBA lenders are NOT all created equal! While it is true that the Small Business Administration (SBA) provides the guidelines and “standard operating procedures” that govern how we do business, there are still some fairly significant differences and areas of flexibility that you need to understand if you want to make a fully informed decision.
One of the most common questions I get is this one: “I currently have a banking relationship and my banker says that they offer SBA loans. Shouldn’t I just work with them because they already know me?” Honestly, the answer is “maybe”. To determine if your current bank is the right fit you should ask a few questions that I’ll cover herein.
First, the SBA has 3 classifications of SBA 7(a) lenders: General, Certified, and Preferred. You always, always, always (did I mention “always”?) want to work with an SBA Preferred Lender.
Often referred to as “PLP” (Preferred Lenders Program), lenders that earn this status have been granted delegated authority to underwrite, process, and close SBA-guaranteed loans on behalf of the SBA. SBA Preferred Lenders (like Gulf Coast Small Business Lending) are dedicated to serving small businesses and are recognized as specialists in SBA lending. As a result, our borrowers benefit from a much quicker overall process. Working with an SBA Preferred Lender on your SBA loan transaction will be (approximately) 3-4 weeks faster than if you work with a non-PLP lender. This topic is also covered in the FAQs on our website here: https://gulfcoastsba.com/faqs/
Next, you need to talk with the loan officer (sometimes called a business development officer) who would be handling your SBA loan request. Is this individual experienced in SBA lending? How many SBA loans has this loan officer successfully closed? Is the loan officer up to date on any recent changes in the SBA loan program? Is the loan officer committed to being responsive and helping you through the process from start to finish? Does this loan officer exclusively handle SBA loans or are they more of a generalist (offering other bank products in addition to SBA)? Lenders who exclusively work in SBA lending tend to offer more creative loan structures because SBA loan originations are their sole focus.
There are also other considerations of the lender such as: do they have any industry limitations, or do they have geographic lending limitations? Sometimes a lender specializes in loans to a specific industry or, perhaps, has had bad experience with a specific industry that might jaundice their willingness to consider additional loans to that industry. Some lenders operate nationwide while others only lend locally within their geographic footprint. It would be helpful to understand if these factors will help or even hinder your SBA loan request. It is also important to confirm that you are working with a direct SBA lender, which means they are lending their own funds. If the lender is not a direct lender, you’ll need to understand if your loan is being “brokered” and if you will pay any fees for this service.
Also, some SBA lenders rely heavily on the collateral that you have available to secure your SBA loan while others, like Gulf Coast Small Business Lending, are more of a cash flow lender. You’ll likely find that a loan officer and a lender that really understands the SBA loan program will be best suited to help structure an SBA loan that fully takes advantage of all the nuances available in the SBA 7(a) program.
In addition, you will want to inquire about the approval process with any lender you are considering. Most have approval authority up to a certain loan size, but not all. Some need to present your SBA loan to a committee that only meets once or twice a month. If you have a critical timeline to manage, it will be important to understand how long it typically takes for the lender to decision an SBA loan. Also inquire about the timeline and steps so that you are able to properly manage your expectations. Some SBA lenders offer a loan prequalification wherein they review basic information before they “green light” a complete SBA loan application. In addition, some will offer a “pre-approval” (with conditions) while some will issue a “letter of intent” or a “term sheet”. It is important to ask questions so you have a clear understanding about how the lender operates and how likely it is that a “pre-approval”, “prequalification”, “letter of intent”, or “term sheet” will ultimately translate to a formal SBA loan approval.
If you have any other questions, I am always happy to talk with prospective borrowers. In addition, you can find additional information about many of the industries and loan purposes offered by Gulf Coast Small Business Lending by visiting the SBA Loans section of our website.
Connie Castaldo has been an SBA lender for over 22 years, providing financing for thousands of borrowers nationwide. Connie joined the Gulf Coast Small Business Lending team in 2012 and served as the National Sales Manager from 2017-2022. In 2022, Connie made the decision to return full-time to her true passion of business development so that she would have the opportunity to directly assist even more entrepreneurs as they fulfill their dreams. Connie’s lending expertise includes business acquisitions, franchises, real estate financing, and construction and she has a Master’s Degree in Organizational Behavior and a BBA in Marketing from The University of Texas. When not originating SBA loans, Connie’s hobbies include house flipping, interior design, pilates, swimming, and spending time with her kids.
Products and services offered by Gulf Coast Small Business Lending, a division of Gulf Coast Bank & Trust Co. Nothing herein shall be construed as a commitment to lend. All loans are subject to credit and collateral approval. Additional terms, restrictions and limitations may apply. Loans are only available to U.S. citizens and residents. Member FDIC – Equal Housing Lender.