The SBA – an alternate lending solution

The SBA – an alternate lending solution

Are you an SBA-approved lender? If so it’s a good idea to have some comprehensive content around how SBA loans work, as the process can be quite confusing for business owners.

For example, it’s important to explain that the money’s still coming from you – the bank – the SBA doesn’t provide the funds. What they do is guarantee the loan to the bank, so it reduces the risk to the bank if they can’t meet their repayment obligations.

So SBA loans are really handy for business owners who might have trouble qualifying for a traditional loan. If they don’t have enough collateral, or years in business to justify the loan, the SBA can help.

Is a SBA loan the right option?

The SBA offers a number of different loan programs, from general lending to funds for disaster recovery. If you’ve turned down a customer for a traditional loan, you may decide to guide them towards the SBA. Depending on the reason for the loan and their business profile, they could be eligible for a SBA loan.

  • Let them know first why they don’t qualify for a traditional loan. If they’ve got financial problems than can be solved, this is a good time to start dealing with them.
  • If you don’t think they’ll be eligible for a SBA loan – they may have a criminal background for example, which the SBA deeply disapproves of – then don’t get their hopes up. Instead, talk to them about other ways of raising finance, especially utilizing their own internal resources.
  • If you do think they’ll be a good fit for the SBA, explain to them that the application process is often tedious and sometimes confusing. The SBA’s application process is legendary for its red tape and paperwork, much of it duplications of what you, the bank, will require as well. Help them navigate the system so that their application has a better chance of being accepted the first time round, instead having to be sent back for revisions.
  • Help them gather all the financial and business background information they’ll need – bank statements, personal background information, tax returns, and a business plan, for starters. The better prepared they are, the more likely their application will be successful.

Encourage them to check their credit history, so that if there are any blemishes, they can fix them ahead of time. If there are inaccuracies, then they need to clear them up. It’s essential that they know what your credit report looks like, so that they’re well prepared to explain it to the bank and the SBA.

At the end of the day, it’s all about due diligence. The better prepared they are, the more streamlined this sometimes difficult process will be. Remembering that the funds are coming from you, it’s a good idea to sit down with your small business customers and carefully go through their application to make sure they haven’t missed anything out.

Here at TSBC, we’ve got plenty of content around the SBA, including the different loan programs, eligibility and the application process. Get in touch with us so we can help boost your online content.


Glen Senior
Glen Senior

CEO Glen Senior has been helping small businesses start and grow since 1989. Along the way, he has published 6 books on small business development and business planning, created training courses, built e-learning platforms, and developed Microsoft USA’s Small Business Plus program which was delivered into 9 countries.Since 2005 Glen has focused on the banking sector and has built up an extensive knowledge of how banks can engage with the small business segment. He has presented at a number of small business banking conferences and is sought out as an opinion leader in this space.