Most small business owners seeking capital will at some point come in contact with SBA financing. SBA financing is guaranteed by the Small Business Administration (SBA), a United States government agency focused on expanding capital access to small businesses. The SBA doesn’t provide financing, instead it serves as a back-stop to participating lenders approved to make loans within the guidelines determined by the SBA.
Great Program, Broken Model
SBA financing can offer many appealing benefits such as low interest rates, long terms, no prepayment penalties, and no hard collateral requirement. Sounds great, right? It is, but government programs usually come with excessive paperwork and long processing time-frames, and the SBA financing program is no exception. Additionally, there are thousands of loan providers who attempt to deliver SBA financing but execute it poorly. The SBA loan process is very unique, and even the most experienced SBA loan intermediaries and lenders often run into pitfalls. Because of the aforementioned, SBA financing has developed a less than favorable reputation over the years causing many borrowers to seek more costly, alternative business loan options.
You Want It, But Can You Get It?
Borrowers aren’t the only ones who have historically shied away from small SBA loans. For an SBA lender it takes as much time to close a small SBA loan as it does a large one. Under the SBA 7(a) program, SBA approved lenders can provide loans from $25,000 up to $5 million, and under the SBA 504 program the upper limit can exceed $20 million. From a lender’s perspective, it makes much more sense to focus on originating larger SBA loans if they are going to earn more on them. Although the SBA removes much of the risk for SBA lenders by guaranteeing SBA loans up to 90% of the loan amount (that guarantee can be as low as 40%), the lender is still on the hook for the rest should the borrower default. As a result, most SBA lenders prefer to provide SBA loans greater than $1 million, secured by real estate or heavy equipment. If you are one of the 28 million small businesses that need access to affordable working capital less than $350,000, and have no hard collateral; even if you want SBA financing, it’s possible that you can’t get it.
SmartBiz is a firm that has completely revolutionized the SBA small loan process in 2 major ways. SmartBiz is a technology company that has created proprietary software enabling banks and other SBA lenders to process and review small (less than $350,000), uncollateralized SBA loans in significantly less time than it was previously taking them. Additionally, SmartBiz has automated the front-end application process for borrowers, now making applying for an SBA loan simple and fast. The end result is that SmartBiz’s technology has enabled banks to entertain a large volume of small, uncollateralized SBA loan requests because it is now financially beneficial for them to do so. Also, borrowers can now receive SBA financing through SmartBiz in as little as 7 days after a completed application; this is a significant decrease from the 45 to 90 days it can traditionally take to receive this funding through other SBA lenders. The great news for borrowers is that banks pay a licensing fee to utilize SmartBiz’s software, so other than the usual and customary packaging fees, there is no extra fee or rate increase to use SmartBiz and their software to obtain an SBA loan.
Although SmartBiz is a technology company, it hasn’t abandoned the human component. Every borrower that applies for financing through SmartBiz receives a dedicated account manager to help usher him or her through the process, assist with any paperwork, and answer any questions. It’s no wonder that SmartBiz has quickly been able to deliver over $1.2 billion of small SBA loans, and has claimed the title as the # 1 online marketplace for SBA loans.
Interested in seeing how much SBA financing you are eligible for in a few minutes, for no cost, and without your credit being affected? Contact our recommended SBA small loan provider SmartBiz.