A major misperception among business owners, regarding SBA loans is that they are all the same. Meaning, most business owners have the perception that all of the terms, processes and eligibility requirements are identical from one bank to the next. Although understandable, this simply is not the case.
There are many innovative lenders and banks that use the SBA guarantees to come up with some very interesting loan programs that can be a major benefit and or solution to business owners seeking commercial mortgages.
The SBA has received a bad wrap over the years due to its seemingly complicated and bureaucratic process. The assumption that many entrepreneurs have made boils down to that the SBA is basically just difficult to work with. Although true that the SBA does add on to the underwriting process, the key is to work with a lender that is an expert at dealing with the SBA guidelines, processes AND is set up as a national PLP (Preferred Lending Partner).
Working with a bank/lender that only dabbles in SBA loans is a huge mistake and you will pay for this in time, frustration and money as the process goes on and on. You want a lender that specializes in SBA loans – this cannot be overstated.
The presumption that all SBA loan programs/terms are the same is also wrong. For example, we do a lot of business with a SBA preferred bank that has many unique products that are guaranteed by the SBA. For example, they offer a SBA 7a loan that is fixed for 5 years and amortized over 25 years – the typically 7a loan adjust once per quarter. Further, this particular programs rate is simply PRIME – not PRIME plus 1-2.75%. The bank also absorbs the 2.5% guarantee fee that the borrower normally has to pay. So, even though your local banks may all offer the same vanilla programs, there are more options out there.
As far as eligibility, most corner banks that work with the SBA have the typical underwriting guidelines – minimum 680 fico scores, 2 years minimum business existence, borrower liquidity requirements, debt coverage ratios of 1.2, etc. This is also an area that some source choice to get innovative on. Another lender we work with will fund borrowers with scores as low as 500, will work with companies with DCR as low as .9 if the rest of the file has merit.
So, not all SBA lenders are the same.