Certified And Preferred SBA Lenders
A small business should always first consider borrowing money from the Small Business Administration. The Small Business Administration (SBA) was first established in 1953 as an outgrowth of agencies that were created to help America recover from the effects of the Great Depression. The SBA describes its mission in the following words, "to aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." Since it's inception the SBA has lent small businesses over $100 billion. Currently the SBA is lending at a rate of almost $12 billion annually and this dollar amount is expected to increase in the future.
To assist in properly approving loans to foster the growth of small business, the SBA has approved almost 1,300 lenders throughout the United States as either "certified" or "preferred" lenders. The SBA approved these lenders specifically to speed up the loan approval process for small businesses seeking a loan and are financial institutions that have been delegated certain authority and responsibility.
Certified lenders account for approximately 850 of the lenders in this program and they have agreed to certain stipulations promulgated by the SBA. This group is able to process a loan application along with the associated paperwork and submit it to the SBA, which will then provide a decision about the loan within three working days. Slightly less than 5% of SBA loans are processed through certified lenders. This group of lenders has expertise in determining all the intricacies involved in attaining a small business loan and can be of considerably more assistance than a financial institution that has not sought and been awarded this designation.
Preferred lenders have been given the authority to act as an agent for the SBA and can approve a loan in-house within 24 hours once the loan application process has been completed. Because the standards for attaining preferred lender status are demanding and the financial institution seeking this designation must be familiar with the myriad of government policies and procedures associated with SBA loans, there are only about 450 institutions nationwide that have sought and attained preferred lender status. This group has specialists that are intimately familiar with SBA loan processing guidelines, which explains why this group processes over 20% of the total number of SBA loans.
While the paperwork associated with acquiring an SBA loan is extensive, the cost savings over the term of the loan can be substantial. With the SBA guaranteeing up to 80% of the loan value, a financial institution providing a SBA loan has considerably more flexibility in determining an interest rate than that which might be available for a standard commercial loan. Consequently the interest rates are often lower for an SBA business loan. Additionally some of the closing costs associated with a commercial loan are prohibited on an SBA guaranteed loan.
It is apparent that if one is seeking an SBA loan it is wise to use a financial institution that is designated as either a certified or preferred lender with the latter being the most obvious choice.
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