Focus On: State of SBA Lending

Posted by in Brian's Blog, Commercial Real Estate, Site News, Tip Of The Week

This week I would like to update you on the state of SBA lending from the front lines of the marketplace.  I have closed 5 SBA loans in the last 5 weeks, pretty much one a week and they make up about 1/3rd of my pipeline. So I am closing these loans, writing a lot of them and talking to SBA lenders from around the country.  So the following is not what you will see in the headlines or the Wall Street/political spin meisters trying to spin their story on whether the economy is doing good or doing bad…what follows is really where the marketplace is right now.

Banks have money!  That is the good news.  There are more banks doing SBA loans then at any time since 2007.  And more banks bring more opportunities in a normal market.  But we do not have a normal market.  Since the crash in 2008 the banks have become hyper regulated.  To the positive, this regulation has forced banks to carry loss reserves and has led to more healthy banks then we have seen since again, the early 2000’s.  But the downside of the increased regulation is an increased scrutiny on loans-banks are reviewing loans not just for borrower risk or property risk but also for regulatory risk.  The people selling the loans and writing them up in your local bank do not know about this extra level of risk that the credit committee is privy to.  The question committee asks is this, “what are the chances of a government regulator considering this to be a risky loan?”  You see, if the regulator, in his/her sole discretion, thinks that the loan is risky then the bank has to set aside loss reserves equal to the risk on the loan.  That is why so many businesses get initial approval from the bank only to be turned down in credit committee-committee is looking beyond the merits of the loan with a fearful eye toward how could this hurt us.

You see, if that regulator determines the loan is risky then they may have to set aside $300,000 to offset the potential loss on that $300,000 business loan.  In other words, it could cost that bank $600,000 in capital to get interest on $300,000 loaned-no bank is going to do that.  Because of this, very few banks will do business only loans unless it is with an SBA 7A loan.  You see, the SBA will guarantee 75% of the losses on that loan so the loss reserve requirements go down 75%!  Additionally, 7A loans are sold on the market just like residential mortgages are to FNMA so the bank gets reimbursed the money and just retains the servicing rights.  This makes them very profitable loans for a bank with a lot less risk.  But there IS still risk, and banks tend to shy away from risk.  This is why current statistics show the big boy banks denying almost 80% of their loan applications while local banks are denying slightly over 50% as of the most recent figures from January, 2015.

HERE IS WHERE WE CAN ADD SIGNIFICANT VALUE TO THE CONSUMER-WE HAVE AN 80% APPROVAL RATE!  In other words, you are 4 times more likely to get approved going through me then going to a mega bank like Wells Fargo or Bank of America.  Why is that?

3 main reasons:

  1. I have access to all the banks from around the country-from aggressive local banks to regional banks to nationwide banks and even non-bank SBA approved lenders
  2. Every bank has tendencies and I have submitted so many loans to these lenders that I have gotten a feel for what their credit committee looks for…some banks key on credit, some collateral, etc. Once I know their tendencies..it allows me to do #3…

 

  1. I underwrite each file and match the strength of the file with the bank most likely to approve the loan. So maybe you have no collateral but you have good credit and good cash flow in your business….I may place you with a non-bank lender who does not care about collateral.

In so doing, by knowing the most lenders, and knowing their tendencies, and matching the file strengths to the lender most likely to key on those strengths, I can provide the ridiculous approval rate just shy of 80%.  NO ONE HAS A BETTER CHANCE OF CLOSING YOUR SBA LOAN-WHETHER BUSINESS OR REAL ESTATE-THEN ME.  NO ONE.  PERIOD.

If you or anyone you know is looking to grow their business or buy a building or start a franchise, give me a call at 866-355-1244.  I will review your loan for free and tell you quickly whether the loan can get funded today or, if not, what would need to happen to get it funded.  That call is free, the pre-qualification and advice is free.  And if we CAN get you done, we will have you a preliminary approval IN WRITING in 48 hours.  One call is all you need-866-355-1244.  Talk to you soon!

Brian

p.s. Remember, NO ONE has a higher approval rate on the loans I write up, NO ONE.  And you and your friends can benefit from this expertise…just give me a call today at 866-355-1244.  I will review the loan for free and if the loan is approvable, get you a preliminary approval in writing in 48 hours.  If not approvable right now, I will give you sound advice on how to strengthen the loan so that you can get approved in the future.  One call is all you need 866-355-1244.