Is It Better To Apply For An SBA Loan Through A Preferred Lender?

by Debi Enders

If you prefer faster decisions and less paperwork, it sure is! When you apply for an SBA-guaranteed loan through a preferred lender, you will get to take advantage of a streamlined loan process that requires less paperwork. While the SBA checks your loan eligibility, it gives preferred lenders the authority to make the final credit decision.  That means you should get an answer on your loan application faster than if you went through a nonparticipating bank, which must send your application through to the SBA for final approval.  That extra step can add up to 10 days to the time you must wait for a decision.

SBA preferred lenders can do more than fast-track the loan process. Because these lenders typically make lots of SBA loans, they can serve as good sources of information as you complete your application and even better sounding boards as you consider your options.  

And you can trust the information they give you. Before they can be awarded status as SBA preferred lenders, financial institutions must demonstrate a proficiency in processing and servicing SBA-guaranteed loans and have a strong record of success in working with the SBA.

Keep in mind that the SBA itself doesn’t lend money. Banks make these loans following SBA guidelines and then service them directly. Should the borrower default, the SBA guarantees repayment, enabling lenders to take slightly higher risks than they might otherwise.

The SBA offers a variety of loan programs for different small-business needs – and with interest rates and repayment terms that are typically better than small businesses might find elsewhere.

Take our advice -- ask an SBA preferred lender.

Debi Enders (debi.enders@commercebank.com) is assistant vice president, small business banking at Commerce Bank.