SBA Commercial Lenders

SBA commercial lenders are mostly banks that receive a guarantee from the Small Business Administration, that in case of borrower default, the bank will receive the bulk of their capital back. With SBA 7a loans the guaranteed portion of the loan balance is 75%. On SBA 504 loans the guaranteed portion is on the second lien position piece which is whatever the loan balance is higher than 50%. In other words if the total loan to value is 90%, 40% of the loan would be guaranteed for the bank.
The importance of this for the borrower is that because of the assurance the funding bank receives from the Small Business Administration they are able to offer more aggressive loans than would be possible. For example it is common for the SBA to offer 90% financing on purchases. And via the 7a program is possible to get 85% financing on refinances. In comparison, conventional bank loans are often capped at 70% -75% on purchases or refinances.Also banks that work with the SBA will consider many special use properties that a lot of banks will not. For example car washes, restaurants or motels are three good example of building types that many non SBA banks won't even look at.
SBA commercial lenders are in general divided into three categories: banks that hold the PLP (Preferred Lender) status through the SBA 2. Banks without the PLP status and 3. Though rare, lenders that are allowed to work with the SBA that do not hold a bank license. Some of these lenders hold the PLP status as well.In general borrowers should consider working with PLP lenders or banks rather than institution that do not hold this designation. The status is earned and awarded by the SBA to banks that continuously meet quantity and quality agendas set by the SBA. Borrowers can feel assured that if they are working with a PLP lender that the bank knows what they are doing.
Another major benefit of working with a PLP lender is the file only has to be underwritten once by the bank. The SBA basically just rubber stamps their approvals and provides the guarantee. In contrast with non PLP banks the file has to be underwritten twice. Once by the funding bank and then again by the SBA. This is where those horror stories of the 6 months to close come from.In general owner occupants of Kerala Property should take a very hard look at what the SBA loans have to offer as there can be some of the best terms available. Also, borrowers should keep in mind that not all SBA programs or banks are the same. There can be a big difference in what is offered and what the underwriting guidelines are between institutions.